Welfare Reform Bill

Lord German Excerpts

Tuesday 8th November 2011 Grand Committee

The other amendment to which I want briefly to refer is that of the noble Baroness, Lady Thomas, which raises a moral issue. The only possible rationale for making the introduction of a 365-day ESA entitlement limit retrospective is to save money. As the noble Baroness has argued, there is a very strong convention that no legislation should be retrospective. Is it not extraordinary that we should break that very strong convention to deprive sick and disabled people of money? I find this very difficult to take. I am sure that we will come back to this on Report. I look forward to the Minister’s comments.

[Lord German]

My Lords, I shall speak to Amendment 75A in my name. I start by saying that the important thing is to get the work capability assessment right. That was a point made by the noble Lord, Lord McKenzie. It is important that people are accurately placed in one or another of the categories. That means that rapid progress needs to be made with the improvements that have been suggested by and are being adopted from Professor Harrington’s report. It seems that the work capability assessment is a crucial first part in ensuring that the whole system works effectively and properly.

The purpose of this amendment is to protect the most vulnerable and the poorest, and to take a slightly different approach from those suggested so far. I should like to start by looking at the context of two words that many noble Lords have used so far in this discussion—“arbitrary” and “temporary”. There is a difference. The noble Baroness, Lady Meacher, referred to any date being arbitrary. It is indeed an arbitrary decision, and if you have some form of illness that will take you beyond 720 days or whatever, then it is an arbitrary cut-off date one way or the other. That is our principal concern—the provision does not address the issues relating to the people concerned.

I of course recognise that there is an issue to which many noble Lords have referred regarding the cost-saving measure in this proposal. I should like to ask the Minister why the savings now being predicted are between £1.3 billion and £1.4 billion, given that in the comprehensive spending review the Chancellor of the Exchequer said that the savings would be £2 billion a year. This is a question that my noble friend Lady Thomas raised—to try to identify why there was a change of procedure from the announcement made by the Chancellor of the Exchequer, who stated that that there would be no backdating and that the provision would not be retrospective, when this proposal is for some form of retrospection.

When you examine the ways in which you can have a non-arbitrary system that deals with people’s needs, and when you look for a system that in our view deals with the most vulnerable and poorest in our society, there is a variety of ways in which you can do it. Obviously, through medical assessment, you could potentially re-examine people at some stage and say whether their medical condition had improved or was changing, or whether the condition would require that the payment should continue. The problem with reassessment is: when do you reassess and how long does that take? If you understand the meaning that I have already put on the word “arbitrary”, then, whether it is 18, 13, 12, nine or six months, you will see that it really is a question of the individual’s circumstances.

[Lord McKenzie of Luton]

I am sorry to interrupt the noble Lord, but if the process is that when someone is put into the work-related activity group there is a prognosis as to how long they are likely to remain there—this is the basis on which referrals to the work programme are made, for example—does he accept that that is a natural and clear point for reassessment?

[Lord German]

It is a point of assessment, but the problem is that people’s medical conditions can alter—they can get worse or better, and there is the issue of fluctuating conditions that noble Lords have also recognised. The point that I am making is that there is a problem with a single point, and you need to have a progression of points if you are going to use medical assessment.

The other approach that has already been referred to in this debate is exemption by groups. Once again, identifying groups of people is very tricky because people can fall into different categories within a particular group. There is also the danger that, if you identify one group, another group might be left out. In this amendment, we are therefore proposing to look at ways in which—while we cannot wreck the Government’s proposals to make savings and reach the overall budget targets that they have set—we can ensure that the most vulnerable are protected from the effects of any time-limiting contributory ESA. This essentially means protecting the poorest and the sickest. The objective, therefore, is to focus the protection of those who are least able to support themselves. I know that that aim is shared by the Government, and we recognise that they are not time-limiting those in the support group, or even those on income-related ESA—to which I shall return in a moment.

However, we are not fully convinced of the thresholds at which income-related ESA apply, or that they are set at a level that will adequately protect low-income claimants—especially those with working partners. It is interesting to note from the impact assessment that 62 per cent of all those who would not be able to claim income-related ESA at the end of 12 months could not do so because of their employment. I want to come back to that issue of income. I know that we are talking here about a form of means-testing but, even so, we are talking about the main reason why people’s payments cannot continue.

We know that the Government are keen to ensure that there are no disincentives to work and that work will always pay. I am also aware that the Conservative Party in the Government wants to strongly support family ties through the tax and benefits regime. As such, it seems odd to us that the narrowness of the ESA means test risks undermining both these objectives, since it can present an incentive for a certain group to give up work. Paragraph 24 of the impact assessment states:

“Those with the most incentive to give up work are partners earning less than £150 a week, as their net income could potentially only be a few pounds less if they gave up work. An indicative analysis shows that 10% of all partners are in this position”.

If that is the case, these are the 10 per cent who are obviously the poorest and the most threatened by the change which is before them. With that 10 per cent of people in mind, this amendment seeks to set in law a floor beneath which the means test cannot apply. We are probing the Government to see whether they think that the test, as currently applied, is adequate to protect the lowest income households.

The amendment is set in terms not of the hours worked, because that is quite difficult to assess, but of the actual paid income. We know that the new universal credit system will enable the DWP to indentify the income of the partner. I am attracted to an income-based level because it is a clearer marker of actual income than hours worked.

Nevertheless, we would like to hear the Minister’s view on alternative methods of measuring income for a means test. We have chosen in this amendment the income tax personal allowance threshold divided by 52, for simply making it a weekly income measure rather than an annual. This is an external marker and thus less arbitrary than plucking a figure from thin air to write into legislation. If you divide the current rate of £7,475, the figure comes to £143.75 a week, which is very close to the £150 figure mentioned in paragraph 24 on page 11 of the Government’s impact assessment. This level therefore almost equates to the £150 figure. The Government’s own assessment notes that this is the level below which there exists a disincentive for people to work. We are trying to address that disincentive.

We—those who tabled this amendment—cannot be committed to a particular bar or level to set. But I am keen—I hope noble Lords will agree—to set in place an architecture for the future. My noble friend the Minister has used many times the argument that the taper can move with time as circumstances permit, but I want a means-test bar from which one can fluctuate as government income increases. We are aware that the Government have expressed the intention to raise the personal allowance threshold and we are very pleased with that. But it seems to us that if the Government think one should keep one’s earnings and not lose them to the taxman below a certain level, the same logic might also be applied to earnings and to one’s partner’s ESA. I welcome the Government’s response to the future impact of this amendment in light of the changes to the tax threshold which are before us in the next few years.

There are two other issues on which I should like to probe the Government. If they were to look at what happens immediately after the 12-month period is up, and if the income-related ESA is not available—because of the bar or the fact it is means-tested, or for any other reason, capital perhaps—will the Minister allow people who would otherwise have been eligible for income-related ESA to have the national insurance contributions credits applied to them? That would allow them to get the passported benefits that came with that purpose and therefore additional benefits would flow. At its minimum level, that would be a level of support that people could look to.

--- Later in debate ---

[Baroness Morgan of Drefelin]

Before the noble Lord sits down, he said that there was a sense that the work capacity assessment needs to be right and that he was thinking about arbitrary cut-offs and temporary classifications. Is he saying that, in order to get this right, we have to look again at the support group? Because of the functional impairment or prognosis of the people whom I am concerned about—those who are known to be facing a terminal prognosis of two years—perhaps they should automatically be in the support group. If that were the case, there would not be a problem

[Lord German]

I can answer that question by simply stating that the work capability assessment, if done accurately enough, should place people in the most appropriate group. Of course, one of the questions in the work capability assessment is, “What are you capable of?”; “capability” is in the title. If you are capable, with an illness, to do some work, and if you know that that will diminish over time, logic tells me that you need to think again about the way that that group of people is affected by such a proposal.

In a sense, what it means is that a clear definition between support on one side and being work ready on the other is not necessarily the only appropriate distinction you can make. It is part of the issue about having clear cut-offs and clear decisions of this sort. You need to be flexible for the people who need it most and whose circumstances will have changed.

[Baroness Hollis of Heigham]

I shall be brief because we have had some very full and powerful speeches from people who are intimately involved and who have specialist knowledge in this field. Like others, as I am sure my noble friends will go on to say, I would prefer not to see this clause in the Bill at all. I very much support the whole range of amendments that have been tabled.

However, I want to add my particular support to Amendment 75A. This is something that many of us referred to at Second Reading. It is the amendment that, leaving aside the issue of the disabled person, most protects the position of the other partner in the relationship, and it is therefore consistent with universal credit. In my view, it is the amendment that, if the Minister seeks to retain consistency with universal credit, he will do his best to support. Basically, we are again running the sort of arguments that we were having over second incomes and disregards, where the question was, “What is the return to work?”, and the Minister told us that he could not afford to run a disregard, even though the costs of childcare might eat up the earnings.

Here, we have the same problem in an even more aggravated form because here, above all, we need if we possibly can to keep the working partner attached to the labour market. We know that if somebody needs to care for more than about 20 hours a week, they probably cannot combine that with anything other than a part-time job. The ingenuity of the Lib Dem amendment is that it allows for something like 24 hours a week at minimum wage or thereabouts, which is pretty much at the tipping point where somebody leaves a full-time labour market and can manage only part-time work in order to make a generous and graceful contribution to caring responsibilities.

If the Minister cannot accept the push of this amendment—I will not say “understand” because I know that he understands it perfectly well—he will be saying to a woman in this position, who may be the working partner: “We are going to make it so unattractive for you to stay in the labour market and work that you, who may very well be tired because of your caring responsibilities, may have financial pressures and may yourself have minor complaints, will want to come out”. It would be infinitely better for her poverty, her health, her connections to the labour market, her sense of self-esteem and her social gregariousness to have a wider life that we should do our absolute damnedest to support her in the labour market—even if on only a part-time basis—and ensure that she kept that money. That is not a huge sum but it would lift her, as a parent, out of poverty and keep her in the labour market. If her partner’s condition deteriorated, we might be very glad that she had that earnings capacity behind her. If he died, we should be very glad that she had remained attached to the labour market and could, after a period of grieving, re-enter it. If he got well, and we would expect to attach conditionality to her, we would be very glad that she had remained attached to the labour market. On all possible outcomes of their partnership, it is in our public interest—the Government’s included—that we keep her attached to the labour market.

I feel very strongly that we have real problems with couples’ earnings. We have seen that before in amendments moved by my noble friend Lady Lister. Here, it seems even more damaging if we go down the parsimonious route of trying to peel off every pound that the woman earns against the partner’s benefit income. I hope very much not only that the Minister will take this away and think about it but, if he is unable to move, that the Lib Dems, who have come up with a decent and ingenious amendment addressing a very real problem—though it is not sufficient to deal with all the problems that disabled people face on the ESA, which need other amendments—will not retreat from the courage of their convictions and will pursue this through.