Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Thursday 3rd November 2011 Grand Committee

[Baroness Drake]

My Lords, the purpose of this amendment is to allow regulations to specify that pension contributions made by single or either of joint claimants are disregarded in full in calculating their income for the purposes of calculating entitlement to universal credit: in effect, that 100 per cent of contributions made to an Inland Revenue approved pension are deducted from earnings that are brought to account in the calculation. The current tax credit rules disregard the whole of any pension contribution, and housing benefit takes half of that contribution into account.

Briefing note 3, which I read again this morning, states that only 50 per cent of pension contributions will be deducted from income under universal credit. I find this decision to allow only 50 per cent of pension contribution to be deducted—as against the current 100 per cent—quite disturbing when we are on the eve of beginning to auto-enrol millions of people into a workplace pension, many of whom will be modest-income earners and many of whom will be in receipt of universal credit. I find it disturbing for three reasons. First, it will undermine the incentive to save—I will come back to this. Secondly, it will impact those on lower incomes. Thirdly—and this is an argument to which I will return on another occasion—it is another example of a government policy measure, of which there have been several over a short period, which results in little or no asset accumulation strategy for low to moderate income earners.

The arguments for auto-enrolment and the 8 per cent base load of contribution included an analysis of financial incentives to save. It included the fact that this 100 per cent of contributions was allowed in the deduction under working tax credit. That analysis was carried out in three instances: once by the Pensions Commission—we were aware of it and it influenced our thinking—and twice by the DWP in its research report 403 Financial Incentives to Save for Retirement, and its report on the savings incentive work programme. The latter report was a very high-profile event; it was carried out in a rather heated environment around incentives to save and means-tested traps. The DWP was full and transparent in its engagement with all relevant stakeholders, sharing data and analysis. The report was widely accepted at the time. In all of these reports it was clear that the way in which pension contributions were treated under the tax credit system was part of the incentive to save and the payback analysis on every pound saved for low to moderate-income earners.

I cannot do justice to the reports in moving an amendment, but I refer to one or two selected examples. Looking at £1 of saving by a low earner under current benefit and tax credit rules, paragraph 4.5 of the DWP Research Report 403 advises;

“the expected payback for a low earner per £1 contribution net of any offsetting benefit effect is £2.81, compared to £2.52 with no such offset”.

The same paragraph, in brief, goes on to illustrate, admittedly for a very stylised individual, how receipt of working tax credit throughout working life by someone on a lower level of income can increase the return on their savings to 4.1 per cent from 3.2 per cent after all the effects of these offsets. Even if tax credits are received only at certain points and not throughout the whole working life, they still boost the net return on savings. If one were to take the difference between 3.2 per cent and 4.1 per cent and express it in terms of a percentage difference in a rate of return over 30 to 40 years, what would that mean? It would mean a pension pot of the order of 20 per cent or perhaps 25 per cent less than it would otherwise be.

Then we come to those on the lowest incomes who are hit hardest. I come back to a point that I made in a previous amendment about the purpose of the tax credit, which was to make work pay. It made it easier for people to get a real return from being in work and accept responsibility. This is very important to those on lower incomes. Clearly, a very strong incentive to save will be lost by changing the rules on pension credit and, inevitably, it is going to trail through to a gender dimension. I always get very stressed when I look at these things in terms of the gender impact.

Referring back to Appendix D of the DWP report on the savings incentive work programme, again this shows that those on modest incomes in receipt of tax credits and housing benefit effectively pay 52p for an individual contribution of £1, which, with the employer match, means that £2 is contributed to their pension. That clearly enhances the payback from saving for these individuals. I know that there will be instances where some people whose incomes are below the earnings limit at which withdrawal begins will not get that benefit. None the less, for significant numbers of people— and that number will increase in an auto-enrolled world—under the current arrangements the payback would be much higher by allowing the 100 per cent.

I come on to the broader point. It is very easy to look at a piece of policy incrementally and say, “We have to make difficult choices. We can do this and save that”, but I am always really concerned when I see a series of incremental policy decisions. When you look at their cumulative effect, they are quite exponential in their impact and much greater than the people who made the individual incremental decisions thought they would be. This is almost disassembling asset accumulation strategy. Policies focused on improving the benefits system and policies directed at asset-building by lower income groups are not alternatives. I get a feeling that there is a debate that says that they are. Certainly when I participated in the debate that led to the scrapping of the savings gateway, that was the debate that was running at that time.

It is not a matter of either/or; you address the low income policy and income redistribution or you address the asset accumulation strategy, but recognising that addressing inequality and enabling people to take responsibility, stay in control and be empowered, and everything that we aspire to for people to achieve, have and be, requires both sets of policies. Yet we see in this Bill and elsewhere other measures by the Government that have the effect of disassembling asset accumulation strategies. We have the one that I am talking about, where the amount of pension contribution deductions that can be made is now to be halved. We saw the removal of the savings gateway. We are seeing the application of quite aggressive capital rules to the savings of those in work under universal credit. We are seeing the application of aggressive capital rules where one partner has reached pension credit age and the other has not. We have seen the aggressive taking into account of ISAs and assumptions about income flow from ISAs, which were a product that was supposed to be targeted at lower to moderate-income earners. It was a high-advantage, simple, cash savings product.

Therefore, when one stands back, I have a general concern about the impact of a series of measures on the asset accumulation strategy for people on low-to-moderate incomes. I honestly do not know how one expects people to embrace responsibility and long-term saving, and think about preparing for retirement, when one of the significant things that contributed to the payback on your savings, apart from the employer contribution, was the way in which your pension contribution interfaced with the benefits system. It is unfair and it is certainly inefficient as a piece of policy, either as pension policy or in helping people to exercise more control and responsibility.

May I also ask about some operational issues that flow from this? It is not clear how personal pensions that are not paid through the employer will be handled when someone says, “I am not engaged in the auto-enrolment arrangements with the employer but I am paying into a personal pension, so how do I get account taken of that?”. Secondly, it strikes me that this will be quite a complicated procedure. If someone is on universal credit and paying a contribution, only 50 per cent of which is taken into account, you cannot take the gross earnings figure and you cannot take the net earnings figure because the Inland Revenue would have given a more generous allowance for that pension contribution. Therefore, you have to create another figure for the 50 per cent allowance that you are going to give on pension contributions. It just struck me as a rather complicated calculation or procedure, so I should like to understand how that will be done. I also dislike and disagree with the intention to reduce it from 100 per cent to 50 per cent. I beg to move.

[Lord McKenzie of Luton]

My Lords, I do not want to add anything to the very full argument around the policy that my noble friend has laid out. I just re-emphasise the issues about the practicalities and how they will work. I understand that employer contributions will not be treated as income for universal credit purposes but only 50 per cent of the employee contribution will be deductible. As my noble friend says, the data that come from the system would be net of tax, net of national insurance and net of occupational pension contributions, not the full contribution. Therefore, some adjustment would have to be made to that. How does that sit with the collection through real-time income and the related point that my noble friend made about when those contributions are made directly to personal pensions? Presumably there will need to be some additional reporting requirement. I guess this just emphasises that, in the world of universal credit, all is not as simple as we would wish and sometimes portray.

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[Lord McKenzie of Luton]

Can the Minister help us on one point? I am interested in the practicalities and operation. He said that we could not do all this through the RTI system. I am trying to understand how much of it can be done, given that the RTI system is going to produce either a gross income figure or a net of tax and national insurance figure.

[Lord Freud]

My Lords, we had a session earlier today trying to go through what the universal credit shows. Without being overprecise, a lot more information is available but effectively you need the net and the gross figures. Clearly, the personal pensions are not captured on that payslip, but the pension contributions through auto-enrolment, for example, would be captured.

[Lord McKenzie of Luton]

I accept that you might have the net and the gross figures, but do you not now need another figure, which is half the occupational pension payment? That is not readily thrown up in the pay-as-you-earn system or any other system.

[Lord Freud]

Yes, we have commissioned that as part of the requirements.

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[Baroness Wilkins]

My Lords, I support the amendment which has been so comprehensively introduced by the noble Baroness, Lady Thomas of Winchester. I wish to make one additional point, which is that one of the very dispiriting elements of having a long-term health condition or a disability is the fact that you are so often on the receiving end of help. It can almost get to the point where you are not expected to be able to do things for other people. For example, I very rarely get leafleted in the street by charity workers. If I go to the door to a charity worker, they apologise that they have bothered me. It is as if you are not expected to be able to contribute to society in any way. However, one very obvious way in which we can contribute is by sharing the experience of our condition, making some value out of it and aiding research in this way. That can surely only be beneficial for future generations, for medical professionals and for ourselves and our self-esteem. It seems nonsensical that red tape in the benefits system should stand in the way.

[Lord McKenzie of Luton]

My Lords, I support the thrust of the noble Baroness’s amendment. I do not think that there was much that I ever did as Minister which was the cause of great rejoicing, but I was grateful for at least one memory. I recall several meetings that we had together, trying to see that we ended up in a situation where amounts paid to service users did not inadvertently affect their benefits. I have been trying to recall all of the detail of that. I am not sure that I can, but I am sure that the Minister will be able to bring us up to date or remind us.

Part of what we were trying to do then was to see if a sensible application of the current rules, by way of clear guidance across Jobcentre Plus, would be a route to tackling it. It was in part, but it did not deal with the whole of the situation. There can be no doubt that engagement of those who actually use our services in shaping how they are organised and delivered can be of enormous public benefit. This particularly applies to the multiplicity of research projects which can underpin innovation and vital developments in services. Service user engagement is to be strongly encouraged. We are thoroughly supportive of this.

As the noble Baroness has said, it seems entirely reasonable, as we reflect on the introduction of universal credit, to see how far a legislative solution will cover the situation, rather than perhaps just relying upon practice and guidance, as happens in part at the moment. However, as we have heard, that does not cover all of the gaps, and there are a range of issues about whether payment just covers actual outgoings, about whether there is an excess or profit, about the frequency of activity and about whether any spreading or averaging rules would apply—we went down that avenue at one stage. There is also the issue of protecting those who decline a payment from the notional income rules. It may be that the disregard regime in universal credit could help or could be made to help. On the basis of the noble Baroness’s figure, that may not be the case.

Turning to the specifics of the amendment, I have an issue about terminology. It refers to expenses,

“wholly, exclusively and necessarily incurred in the performance of the duties of the employment”.

It is an interesting point to distinguish employment and involvement. It is certainly the case in tax legislation, and I think in benefits legislation also, that the phrase “wholly, exclusively and necessarily” precludes taking the costs of travel from home to work out of the arrangements. There has always been a distinction between the cost of undertaking travel as part of your work or involvement and putting yourself in a position to do that, which is travel from home to work. Therefore I am not sure that the formulation is necessarily the right one.

This has been going on for a number of years. Progress has been made, but it clearly has not solved the problem, as we have heard. It would not have a huge price tag, if any, to use this opportunity with universal credit to deal with it absolutely.

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[Baroness Thomas of Winchester]

I am caught between two pieces of advice: one is that we do need legislation and one is that we do not. I am somewhat conflicted, and I would like to get this sorted out before Third Reading. We have been told that for the rules that I read out from the statutory instrument, there was a peg on which to hang it, and that is why they were there. We were told that because there is nothing for NHS research we could not extend it. I shall withdraw the amendment now, but hope that we can resolve this before Third Reading, if not Report.

[Lord McKenzie of Luton]

Could the noble Lord arrange to send us copies of the earlier advice, because there is some confusion and I am not clear in my mind?

[Lord Freud]

My Lords, I will have an early meeting with my noble friend on this, and we will take it from there. Subject to that meeting, I will provide that particular advice, otherwise we may go round the houses on this very technical matter. I hope it is one we can resolve pretty fast, with a letter.

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Moved by

[Lord McKenzie of Luton]

55ZA: Schedule 4, page 123, leave out lines 18 and 19

[Lord McKenzie of Luton]

My Lords, this is a probing amendment to seek the best understanding we can about how support for housing will work for someone on pension credit. Because housing benefit is to be abolished, housing support for those on pension credit, and thereafter outside universal credit, will be by way of a housing credit. It is accepted that there will be a lot of detail to work through, but perhaps the Minister can give us an update on progress.

The system will also provide support for children via a similar route, where this is applicable for those on pension credit. This will often be in circumstances where grandparents have responsibility for their grandchildren. Assurance was given in the other place that the Bill does not need to make special provision for this, because existing powers are sufficient. We accept that position. Therefore, the prospect of there being three strands or components of payments in these circumstances will flow from the Bill.

The points that arise are as follows: will the basic housing allowance follow the local housing allowance regime as for universal credit claimants? Will the 30 per cent percentile, the local housing allowance caps and non-dependant deduction increases be applied to this regime? Will those on guaranteed credit be able to access support for mortgage interest? Is it envisaged that there will be a composite and interlocking calculation of the pension credit, housing and possible child credit components, or will these be calculated separately? What is envisaged in respect of tapers, and will these be aligned? What will this mean for direct payments to landlords? Do the Government envisage any arrangements for pensioners different from those for universal credit claimants? Can we hear what the proposals are for support for mortgage interest—both for those in receipt of pension credit and universal credit? We have an outstanding question on that. What does this mean for the treatment of capital? We previously discussed how these differ between housing benefit and pension credit systems. The former has the £16,000 cut-off and the latter has no maximum, but income is taken into account. Will these two regimes sit side by side, or will they be rationalised? If they are going to be rationalised, on what basis will that happen? What arrangements will operate for uprating purposes? Will CPI be applied to the housing component? What about the uprating of pension credit? I beg to move.

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[Lord Freud]

We are looking very closely at the support for mortgage interest. I can let the Committee know that we are planning to consult on how we do that. Rather than include that point in the letter, I will make sure that noble Lords are informed when that consultation paper comes out.

[Lord McKenzie of Luton]

I am most grateful to the noble Lord for a number of detailed replies, with some follow-up, but can he just be a little more specific around the capital rules? From his answer, it was very unclear what is intended. We have two systems for housing benefit: we have the cut-off at £16,000, whereas for the pension credit we do not. I am not sure whether those two systems will sit side by side in the new arrangements, or whether there will be some common approach to capital, and whether that will adopt the pension credit approach or the current housing benefit approach.

[Lord Freud]

My Lords, it will go somewhere in between. It will be a capital limit as opposed to a tariff income approach, but it will be a higher capital limit than that for working-age claimants.

[Lord McKenzie of Luton]

As I understand it, that will operate for pension credit as well as the housing component.

[Lord Freud]

Yes, that is correct.

[Lord McKenzie of Luton]

I am grateful for that—well, I am grateful for the answer, not necessarily the information. It is the lowest common denominator again. I beg leave to withdraw the amendment.

Amendment 55ZA withdrawn.

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[Lord McKenzie of Luton]

My Lords, this is an interesting and challenging amendment and the debate has been deeply concerning. We have heard from the noble Baroness, Lady Grey-Thompson, that people are terrified and scared about facilities not being available; we have heard from my noble friend Lady Wilkins about the mistrust of the WCA and the profound mistrust of Atos and some challenging questions about how they are regulated; and we have heard from my noble friend Lord McAvoy and the noble Baroness, Lady Howe, about fluctuating conditions.

I understand that the system works at present by seeking to establish if someone has limited capability for work, and that this is determined by a range of descriptors which seek to establish how someone’s physical and mental health affects their functioning. Someone not reaching a sufficient points total would not be classified as having limited capability for work and would therefore—in essence by default—be deemed fit for work. The point was pressed that the assessment does not look at whether someone having not been deemed to have limited capability for work is therefore fit for work in any practical or coherent way. Actually, that gives food for thought. Somebody who has been deemed fit for work would seem to claim JSA and be subject to relevant conditionality and in the world of universal credit be subject to all work-related requirements. There have been ongoing debates about how appropriate the descriptors are and, perhaps more fundamentally, how they are applied in practice. We have certainly heard some of that today. This is of particular interest to us, because we were in government when the system was introduced; I remember all the policy staff and all the work that was done to introduce the ESA and the WCA. Given the fact that it is not working as it should, maybe the judgment was that it is not capable of working in any event, and that is of some concern.

The Harrington review has published its first considerations and the recommendations have been accepted. It is understood that the second review was completed in July and is still under consideration. Perhaps the Minister can give us an update.

A key question that the amendment poses is whether the WCA, properly applied, would mean that the outcome sought by Amendment 55C would inevitably follow, assuming that it was the outcome that was wanted. I think probably not. On making a judgment about somebody having limited capability for work, there is a prognosis also about how long they would remain so assessed—that is to say, a determination about when they would be fit for work. The noble Baroness, Lady Wilkins, again made this point. When making that determination, to what extent would those judgments reflect the criteria that this amendment seeks to set out? Again, I suspect not—but perhaps the Minister can help us by telling us the criteria applied when someone is making a judgment after a while whether somebody is fit to go back to work and fit for the JSA regime or the full work conditionality. Is it just the absence of failure of work-related activities requirements, or is it something more positive in trying to see what they are actually capable of and what the definition is of work? I am not being very clear on this issue, but my concern when I think about it—and I had not thought about it in this way before—is that the WCA assessment puts somebody in a category. If they fail, although fail is perhaps not the right term, they go by default into a category that assumes they are fit for work. Should that judgment inevitably follow from that process?

There is a sense of cliff edge about the system. On one side of it, there are full conditionalities and harsher sanctions, and the full work-related requirements; on the other side, there is lesser conditionality and requirements only in respect of work-related activity, no prospect of higher level sanctions and higher benefit levels. Of course, all of this rests on the judgment under the WCA, subject to reconsideration and appeals and so on. So much hinges not only on the descriptors and how they are set out and whether they are appropriate but on how they are applied. Universal credit does not particularly smooth that particular cliff edge, although it deals with other cliff edges about going in and out of work. But with regard to the analysis and judgment of where people sit in the categories, it does not particularly help. A lot of this is to do with the support that people should have.

[Lord Wigley]

I invite the noble Lord to comment on the relevance of assistance in work. If people are available to help someone who is disabled to undertake their work, it is possible for them to fulfil some of these requirements. If that person is not available, it is the failure of the state to make that person available that is creating the handicap for the person who is disabled. In applying the social definition, there could not be a clearer example than that.

[Lord McKenzie of Luton]

I very much agree with the noble Lord, Lord Wigley. He is absolutely right about that. I imagine that the Minister will reply that this is too narrow a definition of work but I do not want to anticipate what he wants to say. The more I think about it—this is not a formal Front-Bench view—the more I believe that we ought to be thinking about smoothing the path so that we do not have that cliff-edge, as we are doing away with cliff-edges for in-work and out-of-work benefits. Is there not something that we could do to create more of a continuum, so that these very difficult judgments would not have to be made?

[Baroness Hollis of Heigham]

Dials not dichotomies.

[Lord McKenzie of Luton]

Indeed. Perhaps I may finish off with a question. I think that earlier in our deliberations we touched on what would happen if someone sought to challenge the WCA determination, as well as concerns about the fact that their benefit would be withheld during that process. I do not know whether the Minister has anything further to say on that. I think that there was an exchange in the Commons on which I had a note on a piece of paper, which I have lost, but it seemed to give some credence to press reports that people were being actively discouraged from going to appeal. If that were the case, it would be an absolute disgrace.

I think that there is great merit in the amendment. Like the noble Lord, Lord Wigley, and perhaps some other noble Lords, I would not accept it quite as it says. However, when someone says that a person should be in the WRAG group but they should be capable of coming out of it in three months or six months, there ought to be a test of what they would be capable of at that point and whether that would amount to work under this sort of description. I should be interested in the noble Lord’s comments on that.

[Lord Freud]

My Lords, I should start by making a point about the overall attitude of the Government to people who are disabled or who have difficult medical conditions. We are committed to unequivocal support for those people, and that is what the support group is about. There is extra funding for the group and we are absolutely determined to provide that support. In the midst of the concerns about particular things, and as we try to make sure that the gateway works and that we can find the people who really need our support, that fact can be lost. However, I want noble Lords in this Committee Room to be under no illusion that we want to support the people who need our support. I have already expressed my concern about the fear factor, which I find very disturbing. I also acknowledge that the press in this country sometimes writes articles that none of us in this room find appropriate. I certainly do not find them appropriate and my colleagues in the department find them deeply disturbing. We do not control the press, regrettably, and things are written that we do not like to see. However, I am pleased to put on the record where we stand.

We debate the WCA a lot. We have debated it in this Committee and elsewhere, but, if noble Lords will forgive me, on this occasion I want to try to keep the debate in the context of the Bill.

The work capability assessment uses a number of specific, measurable criteria, covering all types of disability and health conditions, to provide an assessment of whether an individual has limited capability for work. The assessment was designed to take account of chronic and fluctuating conditions. It is not intended to be a snapshot but looks at what someone can do reliably, repeatedly and safely. It takes account of the effects of pain and fatigue. The healthcare professionals conducting the assessment are fully trained in understanding fluctuating conditions. Claimants get a full opportunity to explain how their condition varies over time.

The criteria were developed in conjunction with disability experts, medical professionals and a significant number of disability representative groups. They focus on physical and mental function. Examples of criteria include whether someone can stand or sit for periods of time, their ability to lift and reach, how they learn new tasks and whether they have problems engaging socially. The criteria fully take account of the fluctuating nature of many conditions. The training and guidance for the assessment is clear that where an individual is unable to complete an activity repeatedly or reliably, they will score points against the relevant criteria.

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[Lord German]

My Lords, I am not able to support the amendment in the format in which the noble Lord has presented it. The wording states that matters should be discussed with relevant Ministers. The problem is that there are relevant Ministers—the noble Lord will know some of the people I refer to—who would probably say, “I am not going to discuss this with you”, and that would be the end of the game. The amendment, of course, is about consultation.

I should like to make two additional points. Much of what is in this Bill requires action by local authorities which, as I have said before, cannot be undertaken by this Government and this Parliament. This means that the actions necessary to enact many parts of the Bill will be requirements on others.

There is also a two-way dialogue in this. Let us take, for example, the housing issue, which was debated in earlier clauses, and the need for appropriate housing stock and its reshaping to match the changes that are about to take place in housing benefit, and the underoccupancy rules in particular. This will mean that the Government will not have any control over the level of investment in housing stock, the shaping of it or even, in a sense, the policy that will drive it forward.

It is crucial that, in the one direction, if this policy is to be implemented, there is a successful negotiation, not only with Northern Ireland—about which we heard earlier—but with the other parts of the United Kingdom. However, if you look at it the other way round, you may find issues where the legislative competence may not exist at the moment to undertake all the tasks being given to the devolved Administrations. Has any consideration been given to the legislative consequences? It may mean consent Motions being passed in other Parliaments to give action to some of the work that is going on.

We have now a very complex arrangement in the United Kingdom. I have already declared my hand— I think that social security is one of the pieces of glue that holds the United Kingdom together—but to make it work we must work together, closely align ourselves and understand the competencies which are not with this Parliament. We need an update on where we are with the current level of negotiation with both Scotland and Wales, which I suspect is different at present.

[Lord McKenzie of Luton]

My Lords, we should thank the noble Lord, Lord Wigley, for reminding us of the scope there is in the Bill and the profound consequences that it may have, not only for the universal credit but for all the other parts that are before us today and will be before us in subsequent Committees. I thought the noble Lord, Lord German, was on the point of distinguishing between relevant Ministers and irrelevant Ministers, but he did not quite go there.

We saw today—I am afraid I did not see it all—some of the detailed work that has gone on in preparation for, certainly, a big part of what is in the Bill. However, the point has been made by both previous speakers that it is not only about DWP and England; there is lots of work for others to do, particularly local authorities, who are about to reel under the impact of the Localism Bill and all that Mr Pickles has sought to visit on them.

Questions were raised about new burdens and how they work. It is important that that is factored in and that there is fairness and equity in how these matters are rolled out.

I acknowledge receipt of the Low review. Unlike the noble Lord, Lord Wigley, I have not had a chance to read it yet or to quote from it, but it looks to be a particularly valuable document. I hope I have a chance to read it before we get to DLA later in the Bill.

[Lord Freud]

My Lords, I am also looking forward to reading the Low review but I have been listening with great intensity to everything said in this Committee today. Social security is a reserved matter, although it will clearly have a limited, tangential impact on areas of policy where the Welsh Assembly and Scottish Parliament have competence, the obvious examples being childcare and housing. It does not, however, include DLA, which was one of the issues raised by the noble Lord, Lord Wigley.

I can reassure noble Lords that we have held, and will continue to hold, regular discussions with Ministers in the devolved Administrations and their officials. We are committed to the smooth and successful implementation of universal credit. To achieve that we are working closely with devolved Administrations and relevant local authorities to help them identify and address the impact that the introduction of universal credit will have on any services that they deliver. We are doing so in line with devolution guidance. My department is continuing to work through the detailed design aspects of universal credit which will be covered in regulations. Throughout this process they will continue to have discussions with the devolved Administrations, as appropriate, on these provisions and on others in the Bill. I can assure the noble Lord, Lord Wigley, that whatever I am saying here is relevant to the whole of the Bill.

I am concerned that this amendment would introduce a new and unnecessary level of bureaucracy. My noble friend Lord German hinted at some of the problems that it would result in. In practice, that would hamper progress and potentially delay the introduction of universal credit, let alone other aspects of the Bill.

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Moved by

[Lord McKenzie of Luton]

55E: Clause 41, page 18, line 35, at end insert “subject to section 43(3A)”

[Lord McKenzie of Luton]

My Lords, I shall speak also to our other amendments in this group, Amendments 55G, 56B and 69ZA. These amendments relate to the desirability of making a greater number of regulations under the Bill subject to the affirmative resolution procedure to facilitate better scrutiny of any changes that affect claimants and future claimants of the benefits system. In particular, future attempts by regulation to define the meaning of the terms “disabled”, “severely disabled” and “work” should be submitted to both Houses of Parliament for approval. There are several other amendments in this group, which I might speak or respond to after others have spoken to them. I beg to move.

[Lord German]

My Lords, I shall speak to the amendments in my name, Amendments 59, 61, 63, 64, 65, 66, 67, 68, 69, 70, 77, 96, 99, 101 and 106, and to whether Clause 47 should stand part of the Bill. It will not take a wizard to note that these recommendations are based on the report to this House of the Delegated Powers and Regulatory Reform Committee. Before I give a general perspective on why I have tabled these amendments and my response to individual amendments, I shall simply look at the rationale that runs through the Delegated Powers and Regulatory Reform Committee’s reasoning for these recommendations.

The first thing it says—and I think we all agree with this—is that this is a detailed and complex piece of legislation and that it needs to make provision for as wide a range of personal circumstances as is practicable, but it has a perceived need for adaptability. That is fundamental. It comments that this is a significant revision of social security means-tested benefits since at least 1986. It also comments on the way in which there has to be an opportunity for subsequent amendment and for views on the way in which this is being implemented. Clearly, as we all know, this is a skeleton Bill, and the regulations put the flesh on the bones. That is why it is very important that we get the arrangements right, particularly bearing in mind those key principles that I have just outlined.

The Government have accepted some of the amendments, so I will not dwell on them. They have accepted Amendment 59. Amendment 63 proposes the removal of claimants subject to no work-related requirements. This was an issue that came up earlier this afternoon. This amendment removes the requirement from the affirmative procedure only for the first set of regulations and later puts it back into affirmative every time it occurs. I notice that the Government have not yet responded to this amendment, and I hope that they will deal later with the question of whether it should be affirmative throughout. It falls into the category where we may wish subsequent amendments to be dealt with by the affirmative process because they have such a substantial impact on the clients who fall under these no work-related requirements.

Similarly, there is the issue of hardship, and I have done the same thing there. I have taken that from being affirmative for the first occasion only, and in a later amendment I suggest that it should be wholly affirmative. Amendment 65 proposes that the basic conditions be subject to the affirmative procedure throughout. These basic conditions set out by Section 4 and the regulations beyond it specify certain circumstances in which a person has been treated as having accepted the claimant commitment. The basic conditions are laid out in Section 4(1). These are the bare bones of universal credit and should be subject to the affirmative procedure because they are part of the fundamental structure of the Bill. These basic conditions may well change. There will be a requirement for some flexibility, knowing how the system will pan out over time. As the people who are going to be affected by this will be the more vulnerable, it seems to me that we should have an affirmative resolution for those regulations throughout.

On Amendment 66, the Delegated Powers Committee—whose report I read very carefully—said that if the Government could convince it that the negative procedure would satisfy it, that would be sufficient. In their response, the Government said that they would seek to reassure the committee that the negative procedure would be sufficient. I wait to be convinced, as I suppose do many other noble Lords. I am grateful that the Government have changed from a negative to a first-time affirmative procedure, but the amendment questions whether that is significant. I believe that the powers are significant, and the Delegated Powers Committee worried about the restrictions put on claimants and about whether they would be suitable for differing personal circumstances. The Bill and the documents that we already have seem to allude to using these measures in a positive way—something that I support—suggesting that restrictions on types of work will allow claimants to look for work in sectors in which they are interested or for hours that are appropriate for them. Quite clearly, it is an area with significant and changeable circumstances. If it is the view that the negative procedure should be used for routine matters, then, when these policies proceed, there should be an affirmative process.

Amendment 68 relates to the claimants who are subject to no work-related requirements. The Government said that they would make that subject to the affirmative procedure for the first regulations. Once again, the Regulatory Reform Committee asked whether the Government would confirm that there would be only minor adjustments after that first set, and I think that we might be content with that.

With Amendment 69, it is exactly the same process. The Government have put in the affirmative procedure for the first time. If they can assure us that the regulations set out in the first instance are unlikely to change a great deal thereafter, I think that that will be satisfactory as well.

Amendments 70 and 99 would remove the words “Scottish Ministers”. That would not only create equality between the rest of the country and Scotland but ensure that, because Scotland would be doing these regulations by affirmative procedure, the rest of the country would be doing them that way as well. I did not understand why it was not.

Clause 47 provides that regulations under Sections 6 and 7 of the Jobseekers Act 1995 should require only the negative procedure. As of now, they have the affirmative procedure, and the regulations concern claimant conditionality and the requirements for claimants to be available for and actively seeking work on which their jobseeker’s allowance is dependent. The predecessor committee that looked at the matter in 1995 for the Jobseekers Bill considered the provisions concerning availability for work and actively seeking work to be of fundamental importance to the Bill and recommended that regulations about them should require the affirmative procedure whenever made. The DWP memorandum on this topic says:

“Regulations such as this are generally advantageous to JSA claimants. The Department has increasingly found that having to use the affirmative procedure makes implementing the changes more onerous than it needs to be”.

Can the Minister say what “more onerous” means? Does it mean that you have to have open consultation, which seems to me important? The Government rejected the recommendation from the Delegated Powers Committee, saying that moving to the negative procedure was absolutely necessary. I think we would like to know a bit more about what was absolutely necessary.

With the introduction of universal credit, there are bound to be uncertainties that really should not be left to the negative procedure in this matter. Some changes are envisaged in the regulations using the negative procedure, meaning that the Secretary of State can restrict the conditions on a claimant so that they are searching for a job that they want or may not want or one that is near them or is paying well. The precedent set by the previous legislation in this area—in fact, all legislative matters in this area in the past—has required the affirmative procedure to be used for issues of this kind. I wonder whether the Minister can convince us that we need to move in a different direction.

The Government have accepted Amendments 77 and 96, while they have put down an amendment to the part of the Bill covered by Amendment 101, and they have also agreed to Amendment 106.

With a Bill of this magnitude, which has such importance for a great number of people, over the years to come we should be absolutely clear that we are going to have a fully transparent process to allow the debate to occur, not just this year or next year but for the length of time that this Bill survives before changes are made and whenever these matters become important to the public. We need to have that public debate, and I think that Parliament deserves the affirmative resolution in the areas that I have outlined.

--- Later in debate ---

[Lord McKenzie of Luton]

How does the noble Lord envisage definitions of avoidable complexity being built in to the legislation—by regulation, perhaps, or a bit of guidance here and there, or perhaps even something in primary legislation?

[Lord Kirkwood of Kirkhope]

I have no idea—it was a thought in my bath. I confessed that at the beginning. However, it is worth reflecting on. Of course the noble Lord is absolutely right—as soon you start thinking about it, you start putting in layers of complexity. I think a challenge to Ministers is not a bad idea, even if it was just on the wall or behind the desk—I would settle for that. I beg to move.

[Lord Freud]

My Lords, in some areas I broadly agree with the Delegated Powers and Regulatory Reform Committee’s suggestions, and the Government have brought forward amendments to make these changes. Where key principles are established the first time the powers are used, these amendments will make the regulations subject to the affirmative procedure in the first instance. As to Amendment 66, Clause 6(1)(a) allows for regulations to set out circumstances in which a claimant will not be entitled to universal credit even though they meet the conditions of entitlement. I am grateful for the opportunity to reassure the Committee that the negative procedure will afford Parliament adequate control over the use of this power.

As I set out during our debate on Clause 6, there will be a number of specific groups who will not be able to access universal credit. These may include certain prisoners and children leaving full-time care who remain the responsibility of the local authority where payment of universal credit would lead to duplication of provision. This will broadly reflect similar rules in current benefits.

Similarly, I would like to reassure noble Lords that it is appropriate for the regulations on hardship and claimants falling into the no work-related requirements group to be subject to the affirmative procedure only in the first instance. In both cases, our intention is that the initial set of regulations will clearly establish the key principles of the new system. We have already provided noble Lords with a draft of the regulations to be made under Clause 19(2)(d). We have also published a briefing note on the conditionality threshold. We have debated these matters at some length earlier in Committee. Once the system that we have set out is in place, it is unlikely that the regulations will change significantly, and I hope that is the assurance that my noble friend Lord German was looking for.

There are three areas where I am unable to accept the committee’s recommendations or the noble Lord’s amendments. First, the committee and the noble Lord have suggested that Clause 47 should be removed from the Bill. Clause 47 relates to the parliamentary procedure for regulations relating to the requirements on jobseeker’s allowance claimants to be actively seeking, and available for, work. These powers are currently subject to the affirmative procedure. The clause makes them subject to the negative procedure.

These powers were groundbreaking when first introduced in 1995, as the noble Lord pointed out. However, the House now has had more than 15 years experience of how these powers are used. There is a wide understanding of what the phrases “actively seeking” and “available for work” mean; in fact, it fundamentally underpins our active labour market approach. We believe that this experience means that it is now far more appropriate that this power is subject to the negative procedure. Their use is now well established and we have no intention of departing from that precedent.

Secondly, Clauses 33 and 89 allow for supplementary, incidental, transitional and consequential amendments to other legislation to be made through regulations. To pick up on the point that my noble friend made about the Scottish Government, who have powers under Clause 33 to make consequential amendments in their area of remit, they specifically requested that these regulations be made by affirmative procedure in the Scottish Parliament. This was the result of one of our helpful non-statutory discussions, which I am sure an FOI request will show in all its glory. Amendments 70 and 99 would make any regulations that amend primary legislation subject to the affirmative procedure.

It is likely that a large number of minor amendments to other legislation will be necessary as a result of the importance and scale of the changes that the Bill introduces. It is not unusual for some of these changes to be made through secondary legislation, and such consequential powers are usually subject to the negative procedure. Moving away from this precedent would take up a very significant amount of parliamentary time and could pose a risk to the timetables for both universal credit and personal independence payment. We therefore feel that the negative procedure remains appropriate.

Amendments 55E to 55G and 69ZA seek to make regulations that contain definitions of “disabled”, “severely disabled” or “work” subject to the affirmative resolution procedure. It inserts a new subsection into Clause 43 and consequential amendments to the terms where they arise in Clause 41. I can reassure the noble Lord that these amendments are not necessary. Clause 43(3) already provides that a wide range of regulations will be subject to the affirmative procedure the first time that the power is exercised. This includes the regulations to be made under Clause 12 providing for additional amounts that will include the definitions of the terms mentioned in the amendment. Noble Lords may recall that the illustrative draft regulations on elements provided to your Lordships already contain a draft definition of “disabled” and “severely disabled”.

Under Amendment 69ZA, the noble Lord seeks to significantly widen the scope of regulations subject to debate in both Houses, covering consequential amendments and changes to working age benefits and pension credit. It would be completely impractical for this House to debate the numerous consequential amendments being made to both primary and secondary legislation, and a poor use of parliamentary time. I have already explained why it is more appropriate that Clause 33 should remain subject to negative procedures, but none of the other provisions identified by this amendment was covered by the report of the Delegated Powers and Regulatory Reform Committee. We are therefore satisfied that the negative procedure is appropriate.

With regard to universal credit, I should also point out that all the regulations on entitlement, awards and claimant responsibilities will be in a single set of regulations. They will necessarily be affirmative in the first instance because if any regulations within a set are affirmative they all are. So, even if the Bill does not require the affirmative procedure for specific points, it will apply in practice.

Amendment 71 would introduce a different form of scrutiny for universal credit regulations requiring the Secretary of State to avoid creating any unnecessary complexity into the system. I strongly support the spirit of the amendment in the name of the noble Lord, Lord Kirkwood. A key aim of universal credit is to simplify the benefit system. Simplification is a publicly stated, fundamental principle that has guided the design of the new system. Any requirement for simplicity would have to be finely balanced against other considerations, such as affordability or easing the transition to work. I acknowledge that this is a probing amendment, but perhaps a duty to consider the simplicity of any changes, as suggested by the noble Lord, would be a better approach than that in the amendment. However, any Government would clearly have to be concerned about the detailed interpretation of simplicity, which, as the noble Lord, Lord McKenzie, took delight in pointing out, is a subjective term.

Nevertheless, I will look at this idea very closely. I can assure the noble Lord that we will put in place a number of non-legislative safeguards to protect universal credit from unnecessary complexity. These include governance processes to ensure simplification and consistency in policy design, and working with claimants to ensure that universal credit is simple to understand and administer.

Given these explanations, I urge noble Lords to withdraw or not move their amendments.

[Lord McKenzie of Luton]

My Lords, I am happy to do so. However, I should like to comment on the issue of avoidable complexity. The Minister said that he had to balance that against issues of affordability and ease in transition. I accept that, but you also have to strike a balance around issues of fairness. One of the problems of simplicity and standard systems is that they do not necessarily take account of some of the individual circumstances that have to be addressed. You see it perhaps more acutely in the tax system, but it applies equally to the benefits system. Although I clearly support getting things as simple and straightforward as they can be, fairness should also be one of the balancing factors. I beg leave to withdraw the amendment.

Amendment 55E withdrawn.