Welfare Reform and Work Bill

Lord Low of Dalston Excerpts

Wednesday 9th December 2015 Lords Chamber

[Lord Low of Dalston (CB)]

My Lords, I gave notice that I wish to oppose Clause 13 standing part of the Bill and I now wish to do that in support of the noble Lord, Lord McKenzie, and the noble Baroness, Lady Manzoor. Clause 13 would cut ESA by just under £30 a week, or £1,500 a year, for new claimants in the WRAG group from 2017. The Government’s reasoning is that the £30 a week uplift from the JSA level constitutes a disincentive for those in the WRAG group to seek work and that cutting this premium would remove that disincentive.

As I hope many noble Lords will by now know, with my noble friends Lady Meacher and Lady Grey-Thompson I have just carried out a review of this policy approach and its impact on the Government’s objective of halving the disability employment gap. The review was published yesterday; copies have been distributed and I hope that many noble Lords will have had a chance to look at it. I place on record my thanks to the disability charities which supported the review, including Leonard Cheshire Disability, Mind, the Multiple Sclerosis Society, the National Autistic Society, the Royal Mencap Society, Scope and RNIB, of which I am a vice-president and I declare my interest. I also thank the 30 or so organisations which responded to our call for evidence and the nearly 200 disabled people who gave us eloquent and often very personal accounts of their lives and aspirations, and the hardships that they face.

Our review found no evidence to support the Government’s approach. The Government’s impact assessment contains no detail on how disabled people might be affected and seems to be concerned only with savings to the Government, which would amount to £640 million by the end of the Parliament—not a massive amount as these things go. The Government rely principally, as the noble Lord, Lord McKenzie, said, on a 2005 OECD study which deals only with unemployment generally and not the unemployment of disabled people at all, which is generally reckoned to be very different, as evidenced by the intractability of the disability employment gap. Officials have referred us to a 2010 study by Barr and others in the Journal of Epidemiology & Community Health, which suggests that there is a significant negative association between benefit levels and employment. But the authors commented that:

“While there was some evidence indicating that benefit level was negatively associated with employment, there was insufficient evidence of a high enough quality to determine the extent of that effect. Policy makers and researchers need to address the lack of a robust empirical basis for assessing the employment impact of”,

the 2010 welfare reforms.

The central recommendation of our review is therefore that the proposal to reduce payment to claimants in the WRAG group to JSA level should be put on hold in order to carry out a thorough assessment of ESA and the impact that any reductions might have, not only on disabled people, their families and carers but on other services that might be affected, such as social care and the National Health Service, as well as knock-on effects on other benefits. As we conducted our review, I was hugely impressed by the wealth of expertise possessed by the organisations which came and gave evidence to us. If the Minister were to establish a working group to tap into this expertise, I am sure that these organisations would be only too happy to help him get this matter right.

ESA is an income replacement benefit for those assessed as not fit for work. It is important to stress this point, as the noble Baroness, Lady Manzoor, has done. They are assessed as not fit for work; they may have been assessed as capable of undertaking activities potentially leading to work but the essential point to grasp is that they are in the WRAG group because they are not currently fit for work. Moreover, the extra £30 a week is there in recognition of the fact that it takes much longer and costs more for disabled people to take steps towards work, during which time savings run down. It is important to remember that this is a group in which many are already in or close to poverty.

According to the Office for National Statistics, 31% of disabled working-age adults live in poverty compared with 20% of non-disabled adults. Currently, roughly 60% of people spend approximately two years in the WRAG group. This may be even higher for some groups. For example, blind and partially sighted people are five times more likely than the general population to have had no paid work for five years. This compares with 60% of people spending roughly six months on JSA. As I have said, the extra payment is there to reflect that but also to recognise the additional costs that disabled people face when looking for work or undertaking work-related activities. Respondents told us about increased travel costs, as well as the cost of assistive technology. Of course, DLA and the personal independence payment are designed to cover additional costs associated with disability. However, respondents reported that DLA and PIP are not enough to cover all their costs—it is only a contribution to them—and we know that only around 50% of individuals in the WRAG group also receive DLA or PIP in any case. Individuals would really struggle to cover those additional costs if the ESA WRAG component is removed.

Our review took place in the context of the Government’s welcome aim to halve the disability employment gap. It concluded, however, that the proposed cut to ESA would hinder rather than promote this aim. One respondent said that they would need to cancel their phone and broadband contracts, with the result that,

“I would not be able to make calls regarding workplace volunteering that I want to do”,

in order to help them get back to work,

“or make job applications when I am ready. I would also no longer be able to afford smart clothes which you need for work”.

An important contribution came from the Disability Benefits Consortium, which surveyed 500 disabled people in the ESA WRAG group. Almost half of these—49%—said that such a cut would mean that they were not able to return to work so quickly. The disability employment gap is a long-standing structural one, exacerbated by failed back-to-work schemes—the Work Programme in particular—as well as societal and employer attitudes. It is not generous benefits that are holding people back.

Our review identified a very close connection between the proposed cuts and people’s mental health, which, in addition to the human cost, would lead to people being pushed further from the labour market. As one respondent commented:

“Losing this money would make me more worried and stressed which would impact my mental health considerably turning the whole thing into a vicious circle”.

The noble Lord, Lord Patel, stressed this point very eloquently. It is important because the current ESA WRAG group consists of close to quarter of a million people with mental health problems as well as learning disabilities.

In summary, our review concludes that there is no evidence to suggest that disabled people can be incentivised into work by cutting their benefits. Instead, the Government should look to improving support by making it more tailored to people’s individual needs as well as working with employers to tackle attitudinal barriers. If the Government could only do this effectively, and halve the disability employment gap, that would really make dramatic inroads into the size of the ESA bill.

[Baroness Meacher (CB)]

My Lords, I rise to support Amendment 50, moved by my noble friend Lord Patel. I also support the call of the noble Lord, Lord McKenzie, for Clause 13 not to stand part of the Bill. I put on record my thanks to the charities that worked tirelessly to produce what I think was an excellent report for the review, and in particular Rob Holland of Mencap. I also express my gratitude to the hundreds of disabled people who took time to share with us their stories, experiences and concerns. I thank the Minister for a very helpful meeting yesterday focusing on our review.

We need to be conscious of the fact that the cut in the income of WRAG claimants is just one of many cuts to the benefits of sick and disabled people, as has become apparent through these debates. The OBR report shows that there will be a steady fall in the percentage of GDP spent on benefits for sick and disabled people between now and 2020, which I would have thought is something the Government should be rather ashamed of. This is being achieved of course through freezing a number of benefits, tighter criteria for eligibility for PIP—which will lead to 500,000 disabled people no longer qualifying for the benefit by 2018—cuts in the level of disability benefits and, of course, the cut in WRAG benefits by £30 per week, the subject of Clause 13.

Amendment 50, if agreed, would in my view ensure that Clause 13 would never be implemented. There is no doubt in my mind that the implications of this clause for the mental and physical well-being, the financial situation and, more particularly, the ability to return to work of WRAG claimants will be devastating. The first problem concerns the inadequacies of the WCA—the work capability assessment. Many people in the WRAG should very obviously not be there, and should be in the support group instead. One of the problems, but a very important one, is that the WCA is a functional assessment that does not take any account of the real world, in which employers simply will not employ someone with a progressive disease who is already assessed as unfit for work—someone with Parkinson’s disease, for example. The early stages are fine, but then they would be assessed as fit for work. In addition, over half of WRAG claimants have mental and behavioural disorders, including learning disabilities, autism and mental illnesses, which generally fluctuate in their severity.

The Royal College of Psychiatrists reported new research by the universities of Liverpool and Oxford which estimates that the increase in WCA assessments may have led to 590 additional suicides, as well as an increase in mental health problems and in the number of prescriptions for anti-depressants. One has to think about the cost of all these downsides. While some WRAG claimants are, no doubt, quite properly preparing to return to work, many are being inappropriately required to jump through all sorts of work-preparation hoops and, no doubt, being required to make dozens of fruitless job applications, even if they are aware of the electronic screening of such applications, which I learned about from the Minister, most helpfully, yesterday.

Many of these claimants are having to try and come to terms, at the same time, with the fact that they have long-term mental or physical illnesses, terminal health problems or unpleasant symptoms which in many cases will only get worse, as well as with the misery of thinking that no employer may ever take them on again—quite a lot for someone to cope with.

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[Lord Lansley (Con)]

My Lords, I rise briefly to contribute to this debate. I am pleased to have the opportunity to do so and especially to follow the noble Lord, Lord Layard. At Second Reading, he kindly made a favourable reference to the work we did together in the previous Parliament to undertake the national rollout of improving access to psychological therapies. It was very important to do so and he has just eloquently explained to the Committee why it is particularly important in this context of giving people with mental health problems who want to work the opportunity to access treatment that takes them closer to work and gives them opportunities to return to work. I remember visiting just such a centre in Reading and seeing the success it achieved in enabling people with mental health problems to access treatment and get back to work much faster than would otherwise have been the case.

I confess to the Committee that I do not exactly support Amendment 52. There must be very limited circumstances in which we seek statutorily to provide for when the NHS should give treatment to particular individuals or sets of individuals; we have to be extremely careful. I applauded otherwise pretty much everything the noble Lord had to say. I was glad he was able to reference the support in the spending review for increasing access to talking therapies. I thought we had already established the fact, but further evidence has shown that talking therapies are at least as effective, as treatment, as access to medication. It has been reported that medication is no more effective than talking therapies, but I would put it the other way round—namely, we have discovered that talking therapies are at least as effective as medication, and often without the drawbacks associated with the dependence on medication that can emerge. I am very pleased that we were able to work together on the national rollout for the IAPT programme that was announced, if I recall correctly, in February 2011. That was published alongside the first national strategy for mental health, No Health without Mental Health.

I also want to speak to Clauses 13 and 14 stand part, which I very much support. As I said at Second Reading, one issue we need to focus on is helping people with disabilities into employment. Though I mean in no sense to be patronising, I think the report published yesterday, Halving the Gap?, is an extremely helpful contribution by the noble Lord, Lord Low and the noble Baronesses, Lady Meacher and Lady Grey-Thompson. It is an extremely good report, very clearly set out. Its focus is absolutely right—namely, how do we reduce the gap between employment for disabled people and the access to employment that is being achieved by those without disabilities? We are doing this in the context that this country is an economy creating jobs as fast as the rest of Europe put together. Not only are we creating jobs and bringing down unemployment and the claimant count, but we are doing so with a record level of vacancies in the economy. We have the opportunity for employment, therefore, to a degree that we can be proud of; the question is whether we are giving people the appropriate support into work and creating the right incentive structure. I make no apology for saying that all three are important: opportunities for work, which I believe are there; support into work; and incentives for work.

I do not want to go on at length, but this is important. There is a great deal of material in the Halving the Gap? review that sets out some of the ways in which support for people getting closer to employment and taking it up can be improved. It is important never to think about legislation without understanding that, from the Government’s point of view, it is often conducted with legislation on the one hand and administrative action on the other. This is very much one of the areas where the administrative changes are potentially at least as important as the legislative changes. In that context, the Work Programme has worked very well in some respects, but not so well in others—though it is of course a payment-by-results programme, and it was important that it was. Together with the evidence on work choices—which, although small in scale, had some benefits, as has been referred to—it is important to look at those examples, the work in jobcentres and all the other evidence, to see how, in particular, we can design the health and work programme from 2017, which will coincide with the changes proposed in this legislation, to ensure that it helps people in the work-related activity group into employment.

I listened with great care to the noble Lord, Lord Patel. I completely understand his point about giving time. We have to be very careful to understand that we are talking about people in the work-related activity group who may need more time than would customarily be true for those on JSA, but this is not a situation in which the more time is taken, the better it is—far from it. We are looking for people on a part of employment and support allowance to move towards employment and for progress to be made in that respect. That is where we need to focus and why the support that we give is extremely important. The reshaping of that support, which I know is contemplated alongside these legislative and benefit changes, has to happen.

I also mentioned incentives, which are important. It has been said that there is no evidence. One tends to think that the absence of evidence is not evidence of absence, but in this instance the reports from the OECD 10 years ago and from the Barr and others study refer to evidence of a relationship between the generosity of benefits and the employment implications. I do not think we should be surprised by that. The disparity between people’s income out of work and in work is an essential part of understanding the incentive structure. Where that disparity is small, the incentive to work will be less. Where the disparity is greater, the incentive to work will be greater. We have to be clear that that is prima facie. It is not a matter of looking for evidence; we know that it is demonstrably true and there is plenty of evidence of it.

I completely understand that we also need to understand this in the context of people with disabilities and disability employment, but understanding that people with disabilities have special requirements and special constraints should not constrain our understanding that incentives must be aligned with support and opportunities. If the incentives are wrong—if they do not align with the support that we give in encouraging people to be in work or to be continuously moving towards work where they are capable of doing work-related activity—the system will not succeed.

The review was absolutely honest. It said that unemployment and economic inactivity have been stubbornly high for many years, so this is not a situation where we should simply say that what is happening now is good enough. We want to achieve change, and strengthening the incentive structure, alongside the support structure, is an essential part of the overall policy. Therefore, we need to keep the legislative change and the support changes administratively.

I shall make one final point. I was listening carefully to the noble Lord, Lord Low. While the review said that there is no evidence that the generosity of benefits has an incentive effect in relation to employment, there is something of a contradiction within the terms of the review. It is said in the review that there is a difficulty associated with current claimants—they will not be new claimants necessarily moved off accessing the additional support under WRAG in future—who go into employment and might then come back on to the WRAG element of ESA. Logically, because people asserted to the review that they would be disincentivised from taking jobs because they would not be able to go back on to the ESA WRAG element on their previous basis, by implication people were saying that the level of financial support under ESA is in itself a disincentive to taking work. We have to be clear that, within the review itself, there is a sense in which people are openly acknowledging that the level of benefits relative to work is an issue in terms of incentives.

[Lord Low of Dalston]

I understand the point the noble Lord is making, but I put it to him that the contradiction he points to arises only if you decide to remove the extra ESA WRAG component for new claimants. If the benefit remains the same, there is no disincentive in moving off work and moving back again.

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[Lord Freud]

I am not now looking at recommendations for action. I am just looking at what evidence we have that incentives either way work for the disabled community because that is the issue that noble Lords are querying. Let me go on. A paper by Barr et al, published by the Journal of Epidemiology and Community Health in 2010, asks:

“To what extent have relaxed eligibility requirements and increased generosity of disability benefits acted as disincentives for employment?”.

It finds that eight out of 11 studies reported that benefit levels had a significant negative association with employment. To pick up the point made by the noble Lord, Lord Low, about the level of the evidence, while they state that they cannot quantify the size of the effect, they conclude that there definitely is one. The most robust study in that paper, by Hesselius and Persson from 2007, demonstrated a small but significant negative association. The final paper, by Kostøl and Mogstad from 2012, is about evidence from Norway regarding a positive incentive structure allowing disabled claimants to retain more of their benefits when moving into work, which resulted in more claimants starting work. The study shows the impact of financial incentives on disabled people able to undertake preparation for work or work itself, which is a group synonymous with our WRAG population.

[Lord Low of Dalston]

I am sorry to have been a little slow in coming back to the Minister; it took me a little while to find the reference. With regard to the Barr study, the Minister will recall that I pointed out that Barr et al said that, with regard to whether there was a negative association between benefits and employment rates, there was insufficient evidence of a high enough quality to determine the extent of that effect.