Welfare Reform Bill

Lord Knight of Weymouth Excerpts

Monday 12th December 2011 Lords Chamber

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

My Lords, we take the position of carers very seriously and, as the noble Baroness, Lady Hayter, pointed out, today I was very pleased to write a letter, as I had promised, about how the passporting arrangements from PIP would go in and how all of PIP passports into carer’s allowance. I have to apologise—I promised that letter three days before the first day of Report and I think that I am three days late. I hope my apology will be accepted. There was informal information going out, and so it was not too much of a surprise.

The noble Baroness, Lady Lister, asked me whether I was confused. This is an important point, because I sat and worked very hard on this element of carer’s allowance. Two things are happening here. The caring community—the carers—are very keen to have an allowance which is not means-tested, and which recognises their effort and work. I understand that. It is not a question of means-testing it. However, there is a cliff off which the whole allowance falls away, when the carers earn a certain amount. Clearly, that undermines considerably their incentive to work. Therefore, as we were refining the structure for carers, we looked to create, essentially, an additional element in universal credit on top of carer’s allowance, which in practice does not involve a cliff fall in the same way. It is probably easier for me to send a letter on this. I need to clarify this, particularly if the carers’ organisations are confused, as the noble Baroness has said. However, the structure is designed to get rid of these awkward “drop offs” and to be smoother. In fact, noble Lords will be shocked to know that I found a bit of money to put into the system to allow that. If I am not getting credit for that—and I need it—I shall try to earn it by writing a letter spelling out how that has worked.

[Lord Knight of Weymouth]

I am terribly grateful to the Minister. Could he tell us where he found the money?

[Lord Freud]

Finding money is a black art. I need say no more. If I were to reveal any more, it would just rebound negatively on me in every direction. Anyway, that is what has happened. I shall try to spell that out in a letter to the noble Baroness, Lady Bakewell. It is vital that the earnings disregards in universal credit are simpler than those in the current system, in order to achieve the core aim of making the system clear both to claimants and to administrators.

The earnings disregards in universal credit for carers who are in a couple, lone parents or themselves disabled will be more generous than the disregards in the current benefit system, thus enhancing work incentives for the great majority. As we discussed in Grand Committee, I have sent examples to the noble Baroness, Lady Hollis, and more widely, which clearly demonstrate the substantial gains at most earnings levels. I am deeply impressed by the example cited by the noble Baroness, Lady Bakewell, which got to within 3p of the worst possible point. There is a narrow band of between two and five hours where the absolute maximum you could lose is £4.25 a week. I think that the example used by the noble Baroness was £4.22, so she nearly hit it on the nose. I do not know how she managed to miss it by 3p. But the structure means that as you move up, there are some substantial gains. If you move off the small area of two to five hours, there are some big gains. At eight hours of work a week, a single carer would be over £5 a week better off under universal credit, and at 12 hours they would be nearly £15 better off. That is real money, worth £780 over a year.

It may be that the effect of the system is to drive people off the four-hour rate to the six-hour rate. I do not accept that the number of people in that narrow bracket is 50,000. It simply is not that figure and I do not think there is any reliable estimate of what the number is.