Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Monday 24th October 2011 Grand Committee

[Lord McKenzie of Luton]

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

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

to produce,

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

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

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

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

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

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

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

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

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

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

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

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

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[Lord Freud]

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

[Lord McKenzie of Luton]

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

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

[Lord Freud]

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

[Lord McKenzie of Luton]

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

[Lord Freud]

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

[Baroness Greengross]

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

[Lord McKenzie of Luton]

Perhaps I may come back on a point with the Minister to make sure that I understood an answer to an earlier question. In relation to the proposed changes to capital limits for pension credit, did the noble Lord say that that would apply only—I am not sure how it would be worked out—to the housing component or that it will apply to the totality of the package?

[Baroness Hollis of Heigham]

While the Minister is consulting—because he spoke about the additions and so on—it would be very helpful if he could send a letter around giving worked examples of various pensioner couples, or a couple who bestride the pension credit line, indicating what the implications might be, including the cases that my noble friend mentioned. We could then see what it would be. I have no reason, obviously, to doubt the Minister’s word but it would be useful to know whether the discrepancy is £10 or £50.

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[The Deputy Chairman of Committees (Baroness Pitkeathley)]

We have now had 14 minutes. The Committee should reconvene.

[Lord McKenzie of Luton]

My Lords, we have added our name to the noble Earl’s amendment and have Amendments 51CAC, 51CCA and 51EB in this group. These amendments relate to Clauses 13, 14 and 22, which refer to the introduction of the work-related requirements and the claimant commitment. The drivers of some of the work-related requirements or no-work-related requirements depend on whether the claimant has limited capability for work or work-related activities. These concepts are familiar to us from ESA deliberations and it is understood they are to be imported into the universal credit.

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[Lord McKenzie of Luton]

My Lords, as I was saying, these amendments relate to Clauses 13, 14 and 22, the introduction of work-related requirements and the claimant commitment. The drivers of some of the work-related requirements, or indeed no work-related requirements, depend on whether the claimant has limited capability for work and/or work-related activities. These concepts are, of course, familiar to us from ESA deliberations, and are to be imported into universal credit under Clause 38. We will debate that in due course when we reach those clauses. The definitions are aligned to the provisions of Clause 12, and the additional amounts payable under that clause.

Amendment 51CAC seeks to ensure that the claimant commitment provided for by Clause 14 should be not only a record of a claimant’s responsibilities but a statement of the responsibilities of the Secretary of State with regard to the claimant. Amendment 51CCA is in similar vein and requires the claimant commitment to include a statement of the Secretary of State’s responsibilities and details of how the claimant can appeal the contents of the commitment. A similar proposition was advanced in the other place and received short shrift, but given the Minister’s clear commitment to transparency and to the universal credit actually changing attitudes, we are interested directly on these issues.

We had understood that there was a consensus around the proposition that welfare benefits systems should involve both rights and responsibilities for claimants. Those responsibilities clearly encompass compliance with work and work-related activity requirements and the rights obviously include, but are surely not limited to, receipt of relevant benefits. Much of the support for claimants will come via the work programme in which the Government are investing heavily and seem committed to providing personalised support to individuals. A black-box approach gives a framework for that flexibility, but not of itself individualised assurance to claimants. What contractual obligations will providers have to spell out for individual programmes and communicate this to the claimants? Although we accept that the incentivised payments structure will provide encouragement not to abandon the hardest to help—a point that the noble Earl, Lord Listowel, focused on—the obligation to be clear on what support would be provided should surely reinforce this. Of course, not all claimants will enter the work programme, or at least for a while, so there should be an obligation on Jobcentre Plus staff to particularise their side of the bargain.

It is fine having general customer charters, but they are no substitute for setting out what the Secretary of State will commit to in respect of individual claimants. Incidentally, could the Minister take this opportunity to take us briefly through the claimant journey, as it is now envisaged—those who will or will not enter the work programme and the related timescales for the claimant commitment? It is understood that the intent is that the claimant commitment would result from dialogue, although that does not necessarily mean total agreement in every case.

Amendment 51CCA would also have the claimant commitment set out information on how to challenge the contents of that commitment. The Minister in the other place indicated that appeals could arise only following sanctions for failure to comply and we will obviously be discussing those in due course. In respect of work search and availability requirements, the briefing note provided by the department indicated a right to object to what is proposed and an ability to have the position reviewed by another employment officer. However, that is stated not to apply to other requirements recorded in the claimant commitment. Why not?

The amendments yet to be spoken to by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Meacher, are concerned in an important way with those involved in drawing up the claimant commitment to make sure that they are appropriately trained. That must involve access to specialists to cover the multiplicity of situations that will be encountered, such as dealing with those with mental health conditions, fluctuating conditions and hidden disabilities, to name just some. Will the Minister remind us what information from the WCA or indeed the work-focused health-related assessment—he might update us on that because it was suspended for a while—will be before those who have responsibility for inputting into the claimant commitment? So far as the work programme is concerned, what contractual commitments do providers have in respect of training and how is that to be monitored?

These issues of claimant commitment are very important, but in the words of the noble Baroness, Lady Campbell, who is not with us today, we believe that co-production is an important issue. If there is to be real commitment for individuals, it should not be something that is imposed: the Secretary of State should have some ownership of it. I beg to move.

[Baroness Meacher]

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

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

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

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

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

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[Lord Freud]

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

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

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

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

[Lord McKenzie of Luton]

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

[Lord Freud]

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

[Lord McKenzie of Luton]

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

[Lord Freud]

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

[Lord McKenzie of Luton]

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

[Lord Freud]

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

[Lord McKenzie of Luton]

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

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

[Lord Freud]

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

[Lord McKenzie of Luton]

I understand and I thank the Minister for that. You will see the point that I am trying to understand. There was that initial assessment, through the work capability assessment, which determines what category people end up in. There has been much challenge and discussion about whether that process is an appropriate one, whether Atos is fit for purpose, and so on, and that debate will continue. Once that has happened and people are categorised, then support has to be given to those individuals by the claimant commitment, written down or not, by the providers and/or by Jobcentre Plus. When one is looking at the expertise that is available from those providers or Jobcentre Plus, do they have to go through the process again to understand people who have fluctuating conditions, for example, which is one of the recurring issues of the categorisation in the first place? Do they have to relearn what Atos may have devised, I hope, correctly in that original designation? If not, how will they best serve those claimants, particularly those who are most challenged as regards the labour market?

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[Lord Freud]

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

[Lord McKenzie of Luton]

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

[Lord Freud]

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