Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Tuesday 8th November 2011 Grand Committee

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

My Lords, I thought it would be convenient to touch on the timetable. There has been discussion between the usual channels on the best way to take the rest of proceedings. We have agreed, subject to our best endeavours and without overriding anything, that there will be 17 Committee sittings, finishing on 28 November. The main items will be taken as follows. ESA time-limiting will be debated today; the Social Fund issues on 10 November; the PIP on 14 and 16 November; the benefit cap on 21 November; fraud and error on 23 November; and child maintenance and changes to the Child Poverty Commission on the last day, 28 November. I will circulate this timetable to all Peers after today.

[Lord McKenzie of Luton]

My Lords, I thank the noble Lord, Lord Freud, for running through that timetable. Our Front Bench is signed up to using our best intentions to make sure that we stick to it. It is helpful for those who are not necessarily here for every bit of the Bill to know roughly what the schedule is. My Whip, my noble friend Lord McAvoy, has asked me to stress that these are firm intentions but not a straitjacket.

[Baroness Morgan of Drefelin]

My Lords, it is incredibly helpful for those of us on the Cross Benches to hear from the Minister what the timetable for the subject matter for debates might be. Can I also point out how difficult it might be for some of us, with the Health and Social Care Bill being in Committee at the same time as the Welfare Reform Bill? I have amendments down for both Bills and it will be difficult. I know that is true for many Peers.

Moved by

[Lord McKenzie of Luton]

71M: Clause 51, page 36, line 19, leave out “365 days” and insert “a prescribed number of days which must be at least 730”

[Lord McKenzie of Luton]

My Lords, in speaking to Amendment 71M, I shall speak also to Amendment 71P. I shall speak to the other amendments in this group when they have been introduced.

Clause 51 is one of the most controversial and unfair provisions in the Bill. It seeks to limit contributory ESA to 365 days in aggregate in respect of the same reference period. The clause further seeks to have the clock running for this currently so that days of receipt to date count towards the total. Our amendment is modest in that it seeks to remove the reference to 365 days and replaces it with an order-making power for which the prescribed number of days must be at least 730—that is, two years. This formulation provides the route to ensuring that any time-limiting of contributory ESA must be based on a proper analysis and evidence, rather than the arbitrary approach that the Bill adopts.

To justify a time limit for ESA we need to be satisfied that it is reasonable to expect people to return to work within the period, or to be fit for work and transfer to the JSA regime or be subject to work-related requirements in the universal credit regime. This judgment is not without difficulty, given the multiplicity of circumstances that cause individuals to be allocated to the work-related activity group—the WRAG. They include mental health and fluctuating conditions and depend on the level of support that is available to individuals. No one is arguing for a system that enables individuals to stay in the WRAG for ever without making any effort to move closer to the labour market. However, is it not the case that, when placed in the WRAG, there is a prognosis of how long somebody will stay there, and that prognosis is reviewed for its appropriateness before a claimant is moved to the JSA regime or, in the future, to the all work-related requirements of universal credit or, indeed, to the support group?

Therefore, in essence, the system has an individualised assessment of how long somebody may need to remain in receipt of contributory ESA if the national insurance conditions are satisfied. If the Government have confidence in the WCA process, why not rely and build on this approach? Is not the answer that this is really not about fairness or making reasonable judgments about how long people need to remain in the WRAG but all about cost savings and removing entitlements to which individuals may have contributed throughout their working lives?

A lot of figures have been swirling around this matter but we know that government estimates show that by 2015-16 700,000 people will be affected by time-limiting. Forty per cent of these will not qualify for means-tested benefit. Of those who do, can the Minister give us an estimate of those who will receive maximum income-related ESA and possibly the distribution of those who will not? We know that 94 per cent of contributing ESA claimants in the WRAG have a claim, the duration of which is 12 months or more. From the Pathways programme, we know that between 2005-06 and 2008-09 only between 25 and 30 per cent of participants found work within 12 months. There are strong representations, for example, from Macmillan to the effect that for many cancer patients 12 months is not a long enough period before they return to work. It maintains that three-quarters of people with cancer placed in the WRAG still claim the benefit 12 months later.

Of course, the Government’s defence of all this is that income-related ESA will still be available. However, the thresholds for the means-tested benefit is low, and entitlement could be denied if a person’s partner earned as little as £7,500 a year or worked more than 24 hours a week. That is another couple penalty and a significant disincentive to work. The Government’s own assessment is that the average change in income for those who lose out from time-limiting is a loss of £52 a week—a staggering amount—with some losing as much as £94 a week.

We can accept that, as with JSA, an argument can be made for contributory ESA to be subject to a time limit, but the line must be drawn at a point where it is reasonable to expect that people will be able to move on from the support and protection of the work-related activity regime. Three hundred and sixty-five days is clearly far too short a time for this yardstick. Seven hundred and thirty days is, it is accepted, an arbitrary figure to an extent, but the real task is to do the analysis, produce the evidence and do the work so that a proper time limit can be established. This evidence-based approach is what the DWP is usually so good at, and it is to be regretted that it is being abandoned in this situation.

Although not spoken to yet, we wholeheartedly support the proposition that the assessment phase should not feature in the number of days counted for any limitation period. The basic JSA rate is all that is received during this period and claimants do not know whether they will end up in either the WRAG or the support group.

Similarly, we support the amendments that prevent any days arising prior to the introduction of the legislation counting towards any limitation period. Can the Minister tell us how many people will lose contributory ESA at the point that these provisions in the Bill come into effect? Writing to tell people that this restriction is probably on its way—and we will have to see the resolve of the Liberal Democrats on this issue when we have the opportunity to vote—is all very well but helpful advice to the effect that the DWP cannot offer any guidance before the legislation becomes law must have been received with some consternation. Perhaps we can ask what feedback has been received.

I have not spoken to Amendment 71P, which is by way of a probe. The notes provided by the DWP state that people in the support group will not be affected by the proposals. Is this correct? Take the case of someone who starts in the WRAG but because of a deteriorating condition transfers to the support group. Prior to any time limit in legislation taking effect, contributory ESA would have been payable throughout, based on satisfying the first and second contribution conditions at the start of the claim. But if entitlement ceases as a result of the time-limiting rule, will the claimant not have to satisfy the contribution conditions afresh? Satisfying the second contribution condition may not be a problem because of crediting, but the claimant could be out of time to take advantage of the last tax year in which the national insurance contributions were paid, the last time when the individual was actually earning in excess of the LEL.

I have a couple of further questions. When somebody is migrated on to the ESA from contributory incapacity benefit, will the national insurance contribution conditions be treated as satisfied or will they have to be met again? The Minister will recognise that somebody who in later years has been treated as having limited capability for work may well have been credited with sufficient national insurance contributions to satisfy the second condition, but may struggle to satisfy the first condition of paying contributions amounting to 25 times LEL within the previous three complete tax years. When somebody is transferred from contributory incapacity benefit to contributory ESA, is it intended that the 365-day clock starts at that point? What analysis has been undertaken in respect of this in planning transfers to ESA? What is the position of somebody who is no longer in the WRAG because they are considered to be fit for work and currently, therefore, are on JSA? Will they be eligible for contributory JSA, albeit for a maximum of six months? Further, policy briefing note 4 makes it clear that further changes are planned to the employment and support allowance to align the earnings rules and taper with universal credit. With contributory ESA in steady state, accepting for this purpose the 365-day time limit, what analysis has been undertaken of the costs and benefits of this? Is it intended to be cost-neutral?

We have a number of other amendments to consider. I have no doubt that we will hear the refrain from the Minister, “There is no money. These changes are vital for deficit reduction”. But there is always choice. The question is: why make these particular cuts and why is this particular burden to be borne by those who by definition are not currently able to work and, moreover, have paid their dues in the past? I beg to move.

[Lord Wigley]

My Lords, I must say that I have considerable reservations about this clause in general, and these amendments touch on a number of them. I have concern about the provision for time-limiting the contribution-related ESA to 12 months, as is provided by this clause. It means that ESA claimants with a spouse or partner working 24 hours a week or more will not be eligible for the benefit. I believe that the time-limiting ESA is a serious disincentive to work for the partners and carers of ESA claimants, which leads to a situation in which unemployment is more financially sustainable than work, which must be a considerable worry to us all.

I further believe that the time-limiting of ESA punishes working families where one member is claiming ESA. Does the Minister accept that those with a working partner or with other income or capital, possibly up to as many as 400,000 people, will lose entitlement to the benefit completely if these provisions go forward? I urge the Government to think again on this.

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[Lord German]

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

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

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

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

[Lord McKenzie of Luton]

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

[Lord German]

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

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

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

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

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

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

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

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

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

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

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[Lord Freud]

My Lords, I had just begun to address the question raised by the noble Lord, Lord McKenzie, on national insurance contributions. The person who has transferred to contributory benefit from incapacity benefit will be treated as having met the contribution conditions from the point of migration. Claimants will be entitled for a year to ESA if they are placed in the work-related activity group. National insurance credits will continue to be awarded to people who continue to have limited capacity for work, even if they receive no ESA at all.

Through these changes we are sending out a clear message. To the most vulnerable, we will provide the support when it is needed for as long as it is needed.

[Lord McKenzie of Luton]

If the Minister has moved on from national insurance, perhaps he might just address this point of circumstances where somebody starts off in the WRAG and at the start of their claim meets the national insurance contributions, because they have been both credited in and paid sufficient in one of those years. That claim is terminated or ceases after 365 days and the person then moves into the support group. Would that be a new claim for the purposes of attachment to the national insurance contributions? If people had to look afresh at that point, they may well have been credited insufficiently, but they would not be able to pay in, because they would not have been in the labour market and would not have had earnings. They would therefore be disconnected from contributory ESA.

[Baroness Lister of Burtersett]

I shall ask the Minister another question, so that he can get his breath back. I very much welcome what he said about credits. This may reflect my ignorance of the mechanics of it, but could he explain how people get credited, if they cease to be part of the system and have no entitlement to anything?

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[Lord Freud]

The noble Baroness has got that absolutely right. It is both for people who are currently on income-related ESA and those who have been recipients of contributory ESA.

There will clearly be a financial cost to Amendment 71P, but I am afraid that in the short time available I have not been able to produce a robust costing.

[Lord McKenzie of Luton]

I thought the Minister said in his earlier remarks that, effectively, these things did not need the amendment because they were dealt with by way of easement. Therefore, presumably they are already factored into the cost and no additional cost would arise from this. Is that not what he said?

[Lord Freud]

No, that is not what I am saying. The noble Lord’s amendment raises the example of someone who has been in the WRAG for a year, falls off it and in five years’ time falls ill. The amendment would allow them to go onto the contributory support element of ESA as of right. That carries a cost for which I do not have the exact figure. We are working on it.

[Lord McKenzie of Luton]

I am sorry but I thought the noble Lord, in responding earlier, said that there were easements to address this so that you effectively reconnected people because of their national insurance contributions. That was the issue that was being raised. We are dealing here with people who, but for the 365-day time-limiting, would currently have a continual claim to ESA.

[Lord Freud]

My Lords, I am convinced that I did not say that this particular easement was built in. I was talking about national insurance contributions. Once they are through the time-limited period, individuals cannot then switch back into the support group on a contributory basis.

[Lord McKenzie of Luton]

Forgive me, but that means that people in the support group are disadvantaged by these provisions, contrary to the Government’s assertion.

[Lord Freud]

My Lords, people in the WRAG who have gone through their time-limited period do not then have a right to go into the support group on a contributory basis. Clearly, they have a right to go into it on an income-related basis, but not on a contributory basis.

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[Baroness Lister of Burtersett]

Forgive me if I am wrong and I expose the frailness of my knowledge of social security, but I thought that claimants got a lower rate during the assessment phase. Therefore it may be called the same benefit but, in terms of the money people get, it is less. That period is not being included. That is why I am saying that it is a year minus 13 weeks. Yes, they are getting a benefit but at a lower rate.

[Lord McKenzie of Luton]

I can support my noble friend: as I understand it, people get the basic JSA rate in the assessment period.

[Baroness Hollis of Heigham]

You might as well be on JSA and be done with it.

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[Lord Freud]

Yes, that is precisely the position.

[Lord McKenzie of Luton]

Surely that is not right. Is it backdated to the end of the assessment period?

[Lord Freud]

Sorry, I withdraw that.

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[Lord Freud]

I have to admit that I am not particularly happy about the assessment phase of ESA and how it is working. It is becoming a separate benefit in practice. I would like to look at it. It is difficult to have a set of principles around something that one is somewhat unhappy about.

I shall go on with the costs. Amendment 74 would reduce savings by around £430 million in total by 2016-17. Amendment 75A would increase expenditure on ESA by approximately £500 million per year, plus up to £50 million more on other income-related benefits. I cannot accept that we should make these amendments. They would place a very high financial cost on us in the current fiscal climate. I believe our proposed changes are right in principle and fair to the taxpayer. I urge noble Lords not to press these amendments.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his very extensive reply dealing with a whole host of interruptions. That must certainly be a record for this Committee.

[Baroness Hollis of Heigham]

I wonder if my noble friend will allow me to ask him a question? Does he not agree that this shows the undesirability of having one vast grouping all day, which means that we are constantly interrupting the Minister because he is about to move on to something else and we cannot have a discussion on different topics? It would have been perfectly simple to have turned it into something like four groups on the different issues. We could have had a coherent discussion on each of those and then gone on to a wider discussion at the end. This way, we have been to-ing and fro-ing trying to get information. No wonder the Minister has sometimes had to shuffle his papers. It is because of the way that this has been grouped. It is madness.

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[Baroness Hollis of Heigham]

The noble Baroness the Deputy Chairman of Committees is absolutely right, but you do have to lead on the amendment group to have that right.

[Lord McKenzie of Luton]

To satisfy both my noble friends, there is a balance to be struck between making decent progress on the Bill and having coherent discussions. I hope that we have achieved both, or will achieve both, today.

I come back to the Minister’s response, but will comment on what other noble Lords have said. The overall tenor of our very powerful debate this afternoon is clearly to the effect that people are extremely unhappy with these provisions. Comments have ranged from suggesting that we should not have them at all, with Clause 51 not standing part, to a series of detailed amendments. Noble Lords have made a range of extremely pertinent points. The noble Baroness, Lady Meacher, talked about job prospects and asked where the fairness was in this. My noble friend Lady Lister talked about the value of the contributory principle and making sure that it does not get lost, as well as the quality impact assessment and the challenges of denying people an independent source of income.

The noble Baroness, Lady Thomas, talked about the changing of the rules. We do not have an answer yet as to why the Government changed their mind on that, and the Minister may wish to respond further in due course. The noble Baroness, Lady Morgan, raised a range of concerns focused on how the WCA works, and how people access the support group, particularly those who are terminally ill. The noble Lord, Lord Wigley, was one of those noble Lords concerned about whether Clause 51 should exist at all, while the noble Lord, Lord German, talked about the WCA getting it right. I absolutely agree, and we have common cause on that, but we should get it right irrespective of these provisions as it serves a purpose around conditionality and support that should be available to people.

As for what is arbitrary and what is not, I warm to the Minister’s definition—it is what others do, so it is not arbitrary. On that basis, we might almost apply to join the euro, but I do not think that the Minister would suggest that.

Our amendment fundamentally looked at these things being dealt with by way of orders, so you could build an evidence base as to what was appropriate. Yes, we had a two-year minimum, which one would accept was not based on the most robust of evidence. My noble friend Lady Hollis warmed to the thrust of the amendment, as it was one way to ameliorate some of the impacts of the provisions, although it does not deal with them entirely. For example, it does not deal with the independent source of income, which my noble friend Lady Lister was concerned about.

My noble friend Lady Gibson was also concerned about the very existence of Clause 51, and there were some very moving examples from my noble friend Lady Hayter. The noble Lord, Lord Patel, led the charge on the challenge that the assessment period should not be included, that Clause 51 should not be there at all and that there should not be a start to this before the legislation comes into force. There was an interesting reference to Lib Dem conference resolutions, which we might keep in our sights.

However, we should thank the Minister for a very full series of exchanges on a lot of detailed points. Fundamentally, this comes back to costs, which he always quotes at us. I agree that we shall have to study Hansard and get into the figures. He could not resist the jibe about the deficit, although I wish he had because I could have resisted pointing out that we have had an international financial crisis that has affected all major economies.

[Baroness Hollis of Heigham]

Driven by bankers in their former lives.

[Lord McKenzie of Luton]

Driven by bankers—thankfully not accountants. With great respect, I normally find the Minister convincing but he was not convincing on the assessment period, and at the end of the day acknowledged that he had concerns about that. As to the definition of whether the proposal is backdated or not, starting this process up to 12 months before the legislation comes into effect is a very unusual way to proceed.

Part of the reason why we are going down this path is that the Minister said right at the start of his response that we should expect people to avail themselves of the help and support available. He also said that a lifetime on benefits is no longer an option. I would not disagree one iota with that, but no one is arguing for a lifetime on benefits—certainly not for those who can move closer to the labour market and into work. That is not a matter between us, but the noble Lord did not deal with the point about the WCA, around which there is a lot of discussion. We all want it to work as it should do, but is there not, when people are allocated to the WRAG or the support group—certainly the WRAG—a prognosis that goes with them that says how long they are likely to be in that group and, therefore, when they are likely to be fit to join what is currently the JSA group? That is the hope and that is how it works. The Minister has said that in the past and told us that that prognosis is tested before someone is moved off benefit. We therefore have a process by which an individual judgment is made about how long people will be assumed to be in the WRAG, and then ultimately, when that time is up, whether they should remain in the WRAG, go into the support group or join JSA. We have an individualised process, do we not? Why can that not be used?

This is where we fundamentally differ from the Government: if the object is to ensure that people can stay in the WRAG for as long as they need to and have the benefit of the contributory ESA system for as long as is necessary, is that not a fair way of proceeding? On the other hand—I think that this is probably the Government’s position because we need to save money—is the Minister saying, “We do not care how long you need to stay in the WRAG; after a period your contributory benefit will be chopped”? It seems that the position is not related in the Government’s mind to how long people should need support in the WRAG.

[Lord Freud]

If the noble Lord would like me to, I can give him a little information on that. The latest data show that among all those assessed to be in the work-related activity group at their initial WCA, 91 per cent have a prognosis of 12 months or less. However, it is placing an awful lot of weight on such a prognosis to build a system around it. I would personally feel pretty uncomfortable about it. However, the data make the point about the expectation that the curve is rather similar to what you would expect regarding the potential for people to come off—certainly, the WRAG element—on that prognosis.

[Lord McKenzie of Luton]

Is it not the case that the same prognosis is used for remuneration of providers in the work programme because that determines which remuneration slot they are in?

[Lord Freud]

The standard position on the work programme is that people whose prognosis goes into the three-month phase then go into work programme, which provides a heavy incentive at that stage to help those people back into the workplace.

[Lord McKenzie of Luton]

Perhaps I might move on. The noble Lord has stacked up the costs of these various amendments. However, the Government have not reflected on who is bearing those costs. That is a point made by several noble Lords during the debate. It is not just spread equally across the population or pro rata to resources across the population. It is concentrated on a range of people who are in the work-related activity group, who we want to move closer to the labour market but who are currently neither in work nor, according to the analysis, fit for work. That is the fundamental issue that we are trying to get to grips with. I am sure that the amendments that we have discussed in Grand Committee today will all be withdrawn but I have no doubt that we will revisit them in one form or another when we get to Report.

I thought that the noble Lord had reassured me on the decoupling of people in the support group when he first spoke. When we followed that up, I was much less reassured. The claim that this does not affect people in the support group could be difficult to sustain in circumstances where they get disconnected by the national insurance rules. I urge the Minister at least to reflect on that to see whether there should be some change in or expansion of the linking rules. We are dealing here with a situation where, currently, there would be a continual claim whether someone was in the WRAG or the support group. We seek only to establish that if that link in the WRAG is broken because of the 365-day rule, when people end up in the support group they are not disconnected from those earlier national insurance contribution conditions, particularly the first one. We will certainly want to come back to that in detail.

We will not have a meeting of minds on this today but I am sure the Minister will reflect, as he always does, on the data, facts and arguments that have been put to him. It seems very clear today that, overwhelmingly, those arguments have been against what the Government are proposing. Having said that, I beg leave to withdraw the amendment.

Amendment 71M withdrawn.

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[The Earl of Listowel]

My Lords, briefly, I join in the request for the Minister to think very carefully about these matters. I have been moved by the speeches on this amendment. Reference was made to children leaving care, which certainly resonated with me. We know that disabled children are greatly overrepresented among children in care. We know that the transition from care is very difficult for many children without disabilities, so those with disabilities may be doubly disadvantaged as they make that transition into adulthood. Furthermore, we also know that for children with disabilities, in the general run, the turnover of social workers and many disturbances mean that the transition to adulthood and adult services is often very problematic. There are many good reasons why this amendment should be given careful consideration. I look forward to what I hope will be a sympathetic response from the Minister.

[Lord McKenzie of Luton]

My Lords, on this occasion I am happy to be at one with my noble friend Lady Lister and the noble Lord, Lord Patel. I am not sure that I am happy to be reminded about being assailed from the left by the noble Lord, Lord Skelmersdale; I try to put those memories far behind me. These are two important amendments and I hope that the Government will consider them seriously and take them on board. As my honourable friend Stephen Timms said in another place, it is,

“very hard to understand the Government’s justification for abolishing ESA for those people”.—[Official Report, Commons, Welfare Reform Bill Committee, 3/5/11; col. 645.]

He said that it is a measure that seems “unreasonably punitive”. I agree.

[Lord Freud]

My Lords, I shall briefly explain what the existing rules are for young people. Special conditions for young people who are exempt from meeting the usual PAYE national insurance conditions are set out in paragraph 4 to Schedule 1 to the Welfare Reform Act 2007. These provide that a person aged 16 to 19, or 20 to 25 in certain prescribed circumstances, who is not in full-time education and has had a limited capability for work for 196 consecutive days, will be entitled to contributory ESA. No other age group can qualify for contributory ESA without having paid or being treated as having paid national insurance contributions. Nor does any other contributory benefit have similar arrangements. The vast majority of claimants who presently receive contributory ESA on the grounds of youth—around 90 per cent—are expected to receive income-related ESA. Those who do not qualify for income-related ESA are likely to have capital in excess of £16,000 or a partner in full-time work who may be entitled to working tax credit. Clause 52 removes these special rules.