Welfare Reform Bill
Lord McKenzie of Luton Excerpts(13 years, 1 month ago)
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Baroness Drake
My Lords, in moving Amendment 22A I will also speak to Amendments 22E and 52A. Amendment 52A is a probing amendment to establish clarity on the treatment of capital—that is, the types of capital disregarded and for how long for the purposes of entitlement to universal credit. In Schedule 1 to the Bill, line 9 on page 107 refers to universal credit supplementary regulations, which may,
“specify circumstances in which a person is to be treated as having or not having capital or earned or unearned income”.
However, the schedule does not refer to such regards for limited time periods. We have received an initial illustrative set of regulations on the treatment of capital and it is clearly not a final version. I obviously recognise that this is work in progress. None the less, the Bill is before us and it is important to understand the Government’s intention.
Currently, there is a long list of items of capital that are exempted from the calculation of entitlement to means-tested benefits. In many instances, the exemptions are time limited. These range from the value of one’s home and personal possessions to tax rebates and training programme payments. It is not clear whether all these exemptions will continue under universal credit, a point that I noticed at the weekend was registered by the Institute for Fiscal Studies, although I recognise that the draft regulations have started to set these out. It is clear from the briefings we have received from the DWP team that there are gaps and further work to be done. For example, there is an acknowledgement that the treatment of capital where it is jointly held with another person who is not included in the claim still has to be addressed by the Government and a view taken.
This is a particularly important issue, because as a result of the proposed treatment of capital, some of those in work might consequently experience a reduction in their income. This is going to be of some significance for those in work because tax credits do not set a capital cut-off, although there is provision for income that is derived from that capital to be taken into account. Capital above £6,000 will be taken into account in universal credit. Furthermore, with the integration of the in-work and out-of-work benefit, the Government will be applying a tariff approach whereby capital is deemed to produce an income by applying certain rates.
On that basis, will the Minister say whether the current circumstances in which a person is treated as not having capital, including time-limited circumstances, will all continue under universal credit? I have a long list before me, having tried to do my homework, and I can see that there are several not covered in the illustrative list, including: certain payments made to disabled people; the refund of council tax liability; payment by social services; employment and training programme payments; and tax rebates, for future interest in most kinds of property. There are clearly some gaps, which I have already identified. Will the Minister also say when it is anticipated that the definitive regulations on the treatment of capital in universal credit will be available?
Amendments 22A and 22E address the desire to exclude amounts arising from the sale of primary residence from the claimant’s capital for the purposes of entitlement to universal credit for a period of 12 months. Under current rules, money received from selling a primary residence or from surrendering tenancy rights to a landlord is ignored as capital for a period of up to 22 weeks from the date of the sale. I recognise that the briefings we have received have advised us of the Government’s intention to continue this practice, but, in the absence of absolute clarity on the definitive set of rules, it is necessary to table amendments. Equally, however, I seek to extend those rules to allow the capital to be ignored for 12 months.
Under the current rules, capital held on the sale of a primary residence is disregarded for a period of 26 weeks. Clearly, however, already under the existing rules there is discretion to extend that. I am saying that rather than have discretion between 26 weeks and 12 months, a disregard for a period of 12 months should be allowed because selling a house is not easy, particularly in current circumstances. A geographic relocation may be involved, vendor behaviour may be difficult and surveyor problems may occur, and 26 weeks strikes me as a very small period for someone to manage the difficulties of selling and purchasing a new house. Hence, this clause seeks to extend the ability to disregard the capital from the sale of primary residence to a period of 12 months.
Lord McKenzie of Luton
My Lords, I speak in support of my noble friend’s amendment and to catch up on one or two points. We understand the need to merge two different systems of dealing with capital: the tax credit rules and the tariff rules in the benefit system at the moment. One question to the Minister is: why did the Government opt to do it that way round rather than the reverse way round? It could lead to complexities. Someone whose income swings around that £16,000 cut-off point could be in benefit or in the universal credit one day and out the next.
My second question is: can the Minister say something about the practicalities of how this is going to work? What is going to be the process for reporting capital, and how often will that have to be updated? Will it be on a six-monthly basis? Will there be a look back if the capital has changed during an assessment period, giving rise to adjustments to universal credits? I am picking away at some of the complexities around this, because we often promulgate universal credit on the basis that it is a simplified system, and we accept that in some respects it is. However, it still has attached to it these sorts of complexities from the changes in people’s lives. It would be good to know which of the existing exemptions will be carried forward into the new system.
The £16,000 cut-off point will penalise savers, making it harder for low-income working families to save. It will particularly penalise families with high tax credit awards such as high childcare costs or indeed disabled children. Therefore, we see this as a disincentive to save. I was going to ask whether this is wise when there are rumours about auto-enrolment being deferred, but I am advised that that is not now in the Government’s mind.
I was a little surprised in the briefings that we had from the department by comments about it being right that people should, over a period in some circumstances, disinvest their assets before wholly relying upon state support. However, the briefing note quotes in aid,
“earlier means-tested benefits including National Assistance required applicants to exhaust all or most of their savings (and to sell personal possessions regarded as unnecessary)”.
That has a resonance for many people, particularly on the left, and it is why, for a period, reference to means-tested benefits was a derogatory and hated term because it took you back to circumstances in which people knocked on the door, entered the front room and told you to sell every stick of furniture you had before you could rely on benefits. Reverting to references to national assistance and those practices is probably not going to be the most helpful way for the Government to sell this policy.
I support my noble friend on the one-year rule in relation to disposals of properties because the current market is extremely difficult, and even if individuals have the cash to make the purchase, people get caught up in chains and it is difficult for them to complete and sell on so that a satisfactory result can ensue. It is therefore very reasonable to request simply extending that period and that disposals from the sale of property are excluded from the calculation.
Baroness Turner of Camden
My Lords, I, too, support these amendments. I understand that this is a rather difficult question, but one can hardly pick up a magazine directed at older people without encountering articles urging people to save so that when they are older enough money will be available for them to be provided with social care. We do not yet know what the Government intend to do with the report that we have had on social care, but it could very well involve people having to have a lump sum available at a particular time. Quite obviously, it is in everybody’s interests to ensure that people have cover for when they are ill and require social care, particularly as the report includes a general recommendation that people are best off being looked after in their own home. You have to take account of these sorts of possibilities when assessing what is a reasonable amount of money to be regarded as suitable to be retained by the individual concerned when assessing the requirement for benefit.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, this is one of three amendments about capital. I shall start by explaining our intentions for the capital rules and universal credit. I will then be able to be briefer on that context and background when we come to the next two groups. The rules for the current income-rated benefits will be carried forward into universal credit. We intend to limit eligibility for universal credit to claimants who have less than £16,000 of capital. Claimants may save up to £6,000 before there is any impact whatever on their entitlement to universal credit. If they have between £6,000 and £16,000, we would assume a tariff income from this capital. These rules ensure that support is focused on those who really need it rather than on people who have significant resources on which they can draw. This is an important principle, which is essential to ensure that the system remains affordable. As noble Lords have pointed out, there is a slightly opaque area here in the sense that capital can be deferred income and vice versa. It is important to have some rules around the appropriate capital.
In order to be fair to the taxpayer, we have assessed how much families typically save. While nearly one in three pensioner households have savings in excess of £16,000, only 13 per cent of households with a working age adult in them have this much savings. A typical working age household has only £300 in savings. On the point about importing the tax credit system to universal credit, the noble Lord, Lord McKenzie, asked why it is this way around. The answer is simply that it would be unaffordable.
The first group of amendments seek to amend the financial conditions for universal credit by requiring capital derived from the sale of the claimant’s primary home to be excluded from the calculation of capital for up to 12 months when held in a deposit or a prescribed account. However, it is already our intention to provide claimants who have capital from the recent sale of their main home with a significant level of protection. This is clear from the illustrative draft regulations on capital and income recently shared with Peers. The illustrative schedule on capital to be disregarded sets out our intentions on this point.
Capital from the sale of the claimant’s main home received within the previous 26 weeks will be disregarded, which is to be used for the purchase of their new home. That period may be extended where the decision-maker determines that it will be reasonable to do so in the circumstances of the case. An example would be where accommodation suitable for a disabled member of the family has not yet been found. We believe that this approach balances our duty to be fair to the claimant with the need to safeguard universal credit.
Turning to the power in Schedule 1 to treat a claimant as having or not having capital, this is simply taken in order to replicate the notional capital rules that existed in the current benefits system and that guard against claimants deliberately depriving themselves of capital. The exemptions for types of capital covered by the rules in the existing benefits system will be maintained. Some types of payments cited by the noble Baroness, Lady Drake, are classed as income. It is not necessary to add a specific power taken by Amendment 52A. As I have said, the illustrative draft regulations demonstrate that we already have the power to limit the time period for which claimants are treated as having or not having capital where we choose to do so. I hope that this account has clarified the Government’s proposals for protecting the capital of claimants who have recently sold their main home and therefore explains why we could not support Amendments 22A, 22E and 52A.
Lord McKenzie of Luton
Perhaps the noble Lord can help me a little on some of the practicalities of that. We are saying that the existing exemption operates when someone has disposed of their main residence and reapplies it within a 26-week period. Is it a requirement that it is wholly reapplied for the purchase of a property? My noble friend Lady Turner made a point about someone who wanted to save some of that because they were downsizing for carers. Is this looked at retrospectively? Will someone look after the event and see as a matter of fact that it was so applied and, if it was not, what the ramifications are for the application of the universal credit?
Lord Freud
Yes, my Lords. The way it works is that the amount of money that is being reserved for the purchase of a new house is the amount of capital that would be exempted. Other capital would not be exempted. We are currently working on the exact workings of the system and getting these regulations—the next iteration—right. Therefore, I am not currently in a position to lay down clearly, as the noble Lord rightly says, the practical applications and fine tuning of how we apply this. That will come at the appropriate time.
Lord McKenzie of Luton
My Lords, I have little to add to what my noble friend said about her amendment, which she moved comprehensively and quite brilliantly. Will the Minister confirm that ISA income is disregarded under existing arrangements for tax credits whereby the income, not the tariff, is looked at? If that is right, what is the read across to the new regime? Does that not reinforce my noble friend’s amendment?
The Earl of Listowel
My Lords, I was most grateful to the Minister for his previous reply and for the offer of detailed information on the question I asked him. Now I would like to ask him about child trust funds, and I hope I have the right hook on which to put this question. There has been some toing and froing about child trust funds, but thanks to the work of Paul Goggins MP and support cross-party, they have been reinstated for children in local authority care. The local authority will put in a sum, supported by the Government, for each year that a child is in care, I think. I am interested to know how that will be treated in this context. The Government have also moved away from providing money to parents for trust funds, but they are looking to find vehicles to encourage parents to put money for their children into these child trust funds. Again, I am interested to know how that particular vehicle will be treated in this context. I hope that is clear.
Lord Freud
My Lords, Amendments 22B and 22F would exclude from the calculation of capital any savings placed into an individual savings account or other prescribed accounts of a claimant who is in work, or who has been in work in the past 12 months, up to a maximum limit to be set no lower than £50,000. It begs a really very simple question: should the taxpayer support someone who has savings of £50,000? That is the question that is being asked here, and I think it is a question about amounts. The figures we are using were taken over from the existing benefits system, and they were raised a little over five years ago in April 2006. Those figures were doubled from £8,000 at the top to £16,000, and the starting rate from £3,000 to £6,000, so those figures do move around. I accept that determining what the right figure is here is not an exact science. Indeed, one of the things I am keen to have is a responsive system that starts to get research and understand judgments such as what the right figure is here.
I understand exactly the motivation of the two amendments, which is to encourage low-income workers to save. The argument comes down to how much we and the taxpayer can afford. I gave some figures when we debated the previous group of amendments. I will remind noble Lords that if we had an upper capital limit of £50,000, it would cost £90 million a year, which we simply do not have. Under our proposals, only when a claimant, or joint claimants, has £16,000 or more will the entitlement to universal credit cease; and only 13 per cent of households have this much in savings. That is why the figure is not as arbitrary as some noble Lords indicated.
I was asked a series of questions. I will have to add to my letter to the noble Earl, Lord Listowel, to get right the position of children leaving care. Clearly, a child's income and capital are wholly disregarded in the system. The noble Lord, Lord McKenzie, asked about the treatment of ISA interest. Universal credit will replicate the capital rules for means-tested benefits by using a tariff income. It is not possible to read across from the tax credit system. As noble Lords know, tariff income is not—and is not meant to be—the equivalent of the actual income that you might earn on that amount of capital. The figure includes an estimate of how much you should be prepared to run down your capital while you look for support from the state.
Lord McKenzie of Luton
Will the Minister confirm that tax credits and ISA income are not included but are exempt? Is that right or not?
Lord Freud
I will have to write to the noble Lord on ISA income in tax credits. I do not know the exact position. I hope that that explains why we cannot support Amendments 22B and 22F. I ask the noble Lord to withdraw his amendment.
Lord Freud
My Lords, Amendments 22C and 22D would exclude from the calculation of capital prescribed amounts saved for a deposit on the purchase of accommodation for personal use where the claimant is in work or has been in work in the previous 12 months. I can of course see the benefits of encouraging low-earning families to become homeowners, but at present these amendments would be difficult if not impossible to implement efficiently in practice. As the noble Baroness, Lady Drake, pre-empted my argumentation, I will not go into this in depth, but I must say that one would need both the provision of a savings vehicle, which would in effect be exclusively for the purchase of a house, as well as adequate numbers of people wanting to save in this particular way, for that market to work. I do not think there is any necessary block on creating a vehicle like that at some stage in the future, and it would be up to a Government to look at that in the future. Right now, given our constraints, I do not think we are in a position to do it. As noble Lords have heard and as the noble Baroness suggested, these are not necessarily issues of principle; they are issues of affordability and the envelope that we have to introduce universal credit. I remind noble Lords that we have obtained an envelope of £4 billion per annum to give to people in receipt of universal credit. I am not netting it off against other changes, but that is what the universal credit does. Finding extra money for this, that and the other cannot be done just by a wave of the hand. It will be tough to get extra money for desirable things.
It is essential that we get the architecture of a structure that we can use to help and motivate people. If we cannot afford particular things or it would be desirable to develop particular processes, that is fine and we can do it, but right now we do not have those resources. For that core reason, I hope noble Lords will appreciate why we do not support these amendments, and I ask the noble Baroness to withdraw her amendment.
Lord McKenzie of Luton
The noble Lord may need to write to us to flesh out some detail about the £4 billion, a figure that he has used on several occasions. I accept that it is probably a gross figure and that there are some nettings off. Presumably the baseline for that is after taking account of the previous two Budgets and the spending review, and all the hits that occurred there.
Lord Freud
My Lords, I need not write to the noble Lord on this matter because I am trustful that the impact assessment that holds these figures will be on its way—
Lord McKenzie of Luton
My Lords, this is a straightforward and, I hope, brief probing amendment to Clause 6. This clause is concerned with restrictions on entitlement. There are three types of restrictions, two of which are time-related.
Clause 6(1)(c) deals with periods at the beginning of a period of claim, which presumably are supposed to reflect the waiting days applicable to some benefits. Of course, waiting days do not apply to housing benefit or generally to tax credits. Question one for the Minister is therefore how the waiting-day rules are to be applied under universal credit. Application to the universal credit would, as my noble friend Lady Hollis said, be adopting the lowest common denominator. You need, for example, to take account of the fact that rent has to be paid from day one if there are going to be waiting days before the claim becomes payable.
My second question is whether the same sort of exemptions from waiting days that operate currently—for example, in JSA, within 12 weeks of the cessation of another benefit claim—will apply to universal credit. Question three is what linking rules will apply so that the waiting days do not apply where universal credit is in operation previously. Perhaps we can understand the likely period involved in that. Of course, there are various back-dating rules that operate with a range of current benefits. How are these to be dealt with under universal credit?
My next question is: where waiting days are applicable under current arrangements—typically three days—are there any that are seven days, and how is this going to operate in the new world? Clause 6(1)(b) envisages entitlement being denied for up to seven days other than at the start of a period of claim. Perhaps we can have some examples of what the Minister has in mind.
It is understood that Clause 6(1)(a) may be used to exclude certain groups that remain the responsibility of the local authority: for example, prisoners and children leaving care. Can the Minister please confirm—or let us have a note if he is unable to do so today—that the type of exclusions contemplated for universal credit exclude access to all components of the benefits that are to be subsumed into the universal credit? I also draw the noble Lord’s attention to the Delegated Powers and Regulatory Reform Committee’s report on this issue, which says:
“Clause 6 provides for restrictions on entitlement that are left largely to negative regulations. The power in subsection (1)(a), which is subject to no constraint in the Bill, could affect entitlement very significantly. We draw it to the attention of the House so that the Minister may be invited to satisfy the House that the negative procedure affords adequate control over the exercise of the power. Unless the House is satisfied with the Minister's response, we recommend that the affirmative procedure should apply”.
I should be grateful if the noble Lord could also deal with that point. I beg to move.
Lord Freud
My Lords, I will speak to Amendments 23 and 24. Amendment 23 removes the power to make regulations for there to be no entitlement to universal credit in prescribed circumstances. Amendment 24 removes a power for regulations to be made for there to be exceptions to any limited entitlement or waiting day rules. It might be helpful if I indicate the types of circumstances in which we envisage these powers being used.
The regulation-making power in subsection 1(a) will provide that there is no entitlement to universal credit in certain cases where the usual conditions of entitlement are otherwise satisfied. As is the case now, a number of specified groups 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 may include people involved in trade disputes. Amendment 23 would prevent us being able to restrict entitlement to people in these circumstances. This would result in duplication of provision in some cases, which I am sure is not the intention.
I will address the questions of the noble Lord, Lord McKenzie, about waiting days, which constituted the main thrust of his comments. Housing benefit is dependent on entitlement to means-tested benefit, which involves waiting days—for example, jobseeker’s allowance or employment and support allowance. There is also a waiting period in practice for housing benefits. In addition, where benefits such as housing benefit are paid for in complete weeks, there is no provision for short claims of a few days. In practice, when we move from the application of waiting days in the reality of the universal credit world, there will be far fewer instances of this start-up arrangement because people will go on to universal credit for their entire application and will stay on it.
The noble Lord asked about linking rules. Our intention is that people will work their way off the system—that would be a very good outcome—but would remain effectively known to the system for another two years. So that is effectively how the linking rules would work: you would come back onto your taper on an automatic basis. I have not actually thought this through. I imagine—I will check carefully now—that waiting days will not apply when you are on the system and it will be a kind of run-on effective link. I will double-check that waiting days will not apply in those circumstances because my understanding currently is that there is a run-on and that is the same effective claim. So the whole concern around waiting days would be very much diminished. In fact, I am reassured almost instantly that the intention is not to have waiting days as people move on and off the system in those circumstances. As to the question of when Clause 6(1)(b) would apply if not at the start of the claim, it would apply to the entire claim if it covered less than seven days.
Amendment 24 would prevent us having exceptions if we make provision for waiting days or to prevent very short periods of entitlement. We envisage that regulations under Clause 6(3) might be used in a claimant’s favour: for example, where there is only a short break between periods of entitlement, a claimant may not have to serve waiting days before becoming entitled again. I am sorry that I am repeating that point. Although we have made several changes moving from negative to affirmative resolutions, on this one we propose to stay with negative ones. Given this explanation, I hope that noble Lords will not press their amendments.
Lord McKenzie of Luton
I am grateful to the Minister for that response on the issue of negative or affirmative, to which we may wish to return. In order to be clear, perhaps I may use the trade disputes issue as an example. Under current arrangements, there are certain trade disputes under which benefits can be withheld. Under the universal credit, there is an amalgam of benefits, including housing. As regards the sort of exemption that it is envisaged would apply under Clause 6, does it cover all the separate benefits that could give rise to similar exclusions now? For example, would housing being included in the universal credit still be subject to the same trade dispute rules, or will separate rules apply to that? That is not a very elegant way of phrasing the question.
Lord Freud
My Lords, our intention is to have it broadly the same. We have to work through the exact detail of the regulations but our intention is not to change the main thrust of that set of regulations.
Lord McKenzie of Luton
Specifically, if housing benefit were not currently subject to those rules, how would that be unpicked? Perhaps the answer is that it is.
Lord Freud
We would wrap them together in the universal credit but maintain the same regime for trading disputes. That would be the intention. Clearly, we have not written this regulation in detail and we will have a chance to look at it in some detail before we do.
Lord McKenzie of Luton
I am grateful again to the Minister. We should like to reflect and read the record on that issue, and it is something to which we may wish to return. In the mean time, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I support the amendment of my noble friend Lady Lister and congratulate her on an incredibly impressive first amendment. We look forward to many more. I hope that the Minister can see that we are here to help. He has heard not only the voice of experience today but particular proposals from my noble friend Lady Hollis to help him on housing benefit issues. I hope that this well of experience and good will will enable us to move forward on universal credit.
One thing that came across very clearly in the debate was the almost universal voice of experience, whether it was people’s own household experience or that of people such as my noble friend Lord McAvoy who worked with poor people and helped them claim their benefits in the existing maze of complexity. We have heard powerful voices warning of the risks of imposing on everyone the monthly payment basis, for all the reasons that have been heard.
There are particular issues for women. My noble friend Lady Lister said that it is largely mothers who manage poverty in the household. The noble Lord, Lord Kirkwood, was on the same page on that. Studies show that by and large the male member of the household is more likely to be responsible for monthly bills, whereas women tend to do the weekly shop. Therefore, women are potentially particularly disadvantaged by these proposals.
A lot of work has gone into producing real-time data from HMRC. That is at the heart of delivering the universal credit project. Obviously, that is predicated on the formula of monthly payments. As a practical matter, how difficult would it be either to flex on to fortnightly payments or for people to have a choice? I am surprised by those who argue against choice. We all accept the benefits of simplicity, for the reasons that we have debated and will continue to debate. However, a balance must be struck. Simplicity can shut out fairness in a range of circumstances. That is perhaps the dilemma that the Minister faces today.
I think it was the noble Lord, Lord Boswell, who said that it would be a pity if we got this wrong and in doing so undermined the prize of the universal credit, and I very much agree with that. I hope that the Minister will listen to all those who have spoken. The noble Earl, Lord Listowel, spoke about his particular experience of dealing with poor and disadvantaged, chaotic families, as did the noble Lord, Lord Kirkwood, and my noble friend Lady Sherlock. What would happen if one partner spent unwisely in that relationship? What would be the outcome, particularly for children? I hope that the Minister has heard a powerful message today and that it will genuinely influence him in looking at this again. If we want universal credit to work, this could be the key stumbling block.
Lord Freud
My Lords, I start by congratulating the noble Baroness, Lady Lister, on her first amendment, and I hope that she does not have too many like it. I was very impressed when she said that she was a conservative, which was obviously supported because my noble friend Lord Kirkwood called her his noble friend. Clearly we have some cross-dressing going on.
In the policy briefing note published on 12 September, we confirmed that the universal credit will be paid monthly. However, we do not intend to specify the payment frequency in primary legislation. As with all existing benefits, this will be dealt with in regulations made under the existing powers in the Social Security Administration Act 1992. That approach gave us the flexibility, for example, to increase payment periods from weekly to two-weekly for most out-of-work benefits. The amended provision would require the Government to pay universal credit more frequently than monthly. Amendment 27, for instance, goes on to provide that in some cases payments would be made twice monthly.
I need to make the point about the difference between assessment periods and payment periods, which is important to bear in mind. Currently, existing out-of-work benefits are made on an assessment period of a week, with a fortnightly payment cycle. That is fairly typical. The universal credit benefit represents a new approach focused clearly on work, which encourages out-of-work households to budget on a monthly rather than a fortnightly basis in the belief that it will better prepare people for the reality of working life. The figures have already been used. Currently, 75 per cent of all those in employment and 51 per cent of those earning less than £10,000 a year receive earnings monthly. In addition, monthly direct debits for household bills are often cheaper than more frequent billing options.
Many noble Lords raised the evidence base. As noble Lords know, we are conducting qualitative and quantitative research with claimants on many issues but particularly on the payment frequency issue. As some noble Lords have pointed out, on 7 October we published a report, Perceptions of welfare reform and Universal Credit. This outlines findings from research we conducted with claimants, the public, employers and staff in December 2010 and January 2011. There were critical findings in that piece of research that we are looking at with great attention.
I understand that many people on low incomes will be used to managing the fortnightly payment of benefits, and I am determined to ensure that there will be appropriate budgeting support to meet the needs of claimants. We want families to be able to manage their financial affairs in a manner that best reflects the demands of modern life, whether they are in work or out of work, and we are working with stakeholders and benefit experts to that end. We are setting up a series of demonstrator projects, as they are called, with housing associations and local authorities to look at how to structure the payment of rents to landlords. These demonstrator projects will look at a wide range of budgeting support. We need to make sure that budgeting advice and support is available for those who need it in order to help them manage the change.
We also need to consider those exceptional circumstances where more frequent payments will be required. To pick up the point made by the noble Baroness, Lady Campbell, people with mental health problems are an example of a group that may need an exceptional service. To pick up the point made by the noble Earl, Lord Listowel, where there is proven abuse or risk to other members of the family, one would have to look at the payment arrangements.
If you separate assessment from payment, the monthly assessment is intended to reduce the burden on claimants and reduce the risk of overpayments compared with a system where benefits are reassessed on a weekly basis, so there is a separation between the assessment period and the payment period. To pick up a question from my noble friend Lord Kirkwood on the impact assessment—
Baroness Hayter of Kentish Town
Some of my comments will not be appreciated but I thank the Minister for his response. Clearly, I have not received the same response as did my noble friend Lady Lister. I will take it back and think about it. She does not know when she is ahead. However, I am afraid that I have to express some regret. A lot of us have done a lot of work in preparing for the Bill although I am sure that we have done much less than the Minister. I blame my noble friend Lady Sherlock in that when I asked her what I should do she advised me to read everything that was said in the Commons. I thank her for that. What I found again and again were promises from Ministers in the other House that by the time the Bill reached Committee stage there the relevant information would be available. Again and again I am afraid I read that our friends in the other place found that that was not the case. They nevertheless were given absolute assurances that the relevant information would be available before the Bill reached Committee stage in this place. To have something published today concerning a debate that is taking place today is simply not good enough. We cannot work that way; “before” ought to mean before. Anything that is relevant to what we are talking about should be with us in time to enable us to read it and think about it.
I welcome the remarks about our being involved in the debates about how this process is going to work. I think that those remarks were probably genuine. However, that means that we have to have the relevant information available, especially as we are trying to discuss the Bill without a wonderful array of staff to help us.
I also regret the remarks about ESA, maternity allowance and earnings. The women who will be getting this who have been in work may simply not qualify for a statutory payment because they have changed employers. However, they could well have been working full time before that. In that sense it is not a benefit but something that they earned and are entitled to. Therefore, to treat it as unearned income—as if a sugar daddy had given it to them—would not be the right approach. It has been earned, albeit in a different way.
Similarly, the Minister did not respond to the question of whether ESA affected the self-employed. They are another group of people who have paid contributions into a system. If they then discover that what they get when they are possibly very seriously ill with cancer is seen not as something that they have earned but something from a very kindly Government, that will not be the right way to ensure that people see the system as enabling them to get something for what they have put in, which is what many of us want. I am sorry about that and I hope that, even if the Minister does not respond orally now, he will think about those groups of people, and in particular about women whose circumstances may have changed and who may have moved to a better job. On the whole it is young women who get pregnant. They may be moving up in a career and may have moved to a different employer and therefore may not qualify.
I have two further brief points. We are obviously delighted about any monitoring and assessment. If there is to be no formal review, I will have to accept that that is the best way of doing it. Nevertheless, it would be very nice if the Minister or his successor will bring those reports to the House, where they can be debated in the same way as we are able to now.
Finally, I accept that the Minister may not want to set a target rate for a taper. He said that perhaps 65 per cent was too high but that a future Government could perhaps do something about it. I look forward to sitting next to my noble friend Lord McKenzie when he is the Minister in a future Government—
Baroness Hayter of Kentish Town
—and can announce a different taper rate. With those comments, I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(13 years, 1 month ago)
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Lord McKenzie of Luton
My Lords, Amendment 2 seeks to attach a clear but succinct purpose to the universal credit; that is,
“to support work for those who can and provide security for those who cannot”.
Much of the focus of our discussion about the universal credit is on the former, helping people into work and closer to the labour market, but there is an obligation also to help those individuals and families for whom work is, for one reason or another, not currently reasonably practicable. We subscribe to the view of the importance of work in helping people out of poverty, in the development of their self-esteem and, as per Waddell and Burton, as being generally good for their health. This has the potential to translate at the macro level to the prospect of lower benefit costs, higher taxes and national insurance and, other things being equal, higher growth. That approach characterised the reforms, which I will call welfare reforms notwithstanding our discussion last Tuesday, of the previous Government and this Bill is a significant development of that trend. Of course, the Minister has been present in both of them.
Contrary to popular belief, it might be contended that receiving financial support from the state when unemployed and unable to work is harder now than at any time for 60 years—that is certainly the view of the Child Poverty Action Group—because the eligibility criteria for benefits have been heightened, benefits are more conditional on actively seeking work and there are tougher sanctions for non-compliance. Some of this happened on our watch as a Government and universal credit provisions go further and, in some respects, too far. We will discuss this when dealing with later clauses, but we support the concept of good and clear work incentives. We also support the requirement for those who can work to meet their obligations. There are some who need to rely on benefits and who do not lack the motivation to work, who see the benefits of work even with existing incentives. As we go through the Bill, we will seek to test that the new universal credit works for them also. These include those with caring responsibilities and health conditions, but also those who simply cannot get a job, be they from Bombardier, BAE systems, or, indeed, anywhere else.
It is worth reminding ourselves of what has gone before. If we look at the recent history of welfare reform, the Welfare Reform Act 2007 introduced the employment and support allowance and the personal capability test; the report of the noble Lord, Lord Freud, focused on the large-scale marketisation of employment services; in 2008 we saw the employment and support allowance introduced; we saw lone parents move off income support and onto jobseeker’s allowance and flexible New Deal pilots introduced to replace the New Deal 18-24 and New Deal 25+. The Welfare Reform Act 2009 established a structure for the future abolition of income support, the progression to work conditions for lone parents and partners of unemployed people, and the extension of work-related activity for employment and support allowance recipients. So hitherto an increasingly active regime has been developed. As I say, we support the concept of good and clear work incentives. We also support requirements for people to meet their obligations.
Of course, the “work first” approach is not the only model of support that countries have adopted. The “human capital development” approach would be claimed by some to be a more effective approach. The Minister often talks about universal credit as engendering a cultural change in attitudes towards work, and that is fine, but he will be aware that in some countries benefit conditionality is also being used to leverage non-employment related outcomes, such as health outcomes and child welfare outcomes. This happens in the US and Australia in particular. I understand that the Secretary of State has recently been on a trip down under. We see speculation in the press that Ministers are turning their minds to benefit sanctions, as the noble Lord, Lord Kirkwood, said on Tuesday, to address a range of other problems. Can we have some clarity on this today, and will the Minister confirm that there are no plans or intent to follow the Australian path and use conditionality for anything other than employment-related outcomes?
It would be extremely helpful when Ministers, including the Prime Minister, are discussing changes to conditionality that they do so in a measured way to avoid creating the impression that everyone on benefits is seeking to avoid work. In his speech to the Conservative Party conference, the Prime Minister said:
“For years you’ve been conned by governments. To keep the unemployment figures down, they’ve parked as many people as possible on the sick. Two and a half million, to be exact. Not officially unemployed, but claiming welfare, no questions asked”.
Nobody who has any knowledge of the benefits system could reasonably accept that as a fair representation of the situation in recent years. When we left Committee on Tuesday last week, there was a headline in the Evening Standard saying that people would have to travel for up to 90 minutes to take up work. Can the Minister say how conditionality is to be amended in this way? If everyone is to be better off in work, will this be before or after travel costs?
Of course, the universal credit is being developed in a period of rising unemployment. I do not propose to open the wider challenge to the Government on their growth strategy this afternoon, although we may drift into that, but we should use this opportunity to seek to understand how the “work first” approach of universal credit is being complemented by the work programme—the “black box approach”, which I believe is entirely appropriate.
Perhaps the Minister would take this opportunity to update us on the programme, particularly as we understand that providers are being sworn to secrecy about how it is all going. In the interests of transparency, perhaps the Minister could tell us directly how many individuals have been referred to the work programme to date, clarifying which of the eight categories they fall into. Can he also tell us a little about how the WCA and the role of Atos Healthcare are feeding into all of this? We are aware of the improvements to the WCA and Professor Harrington’s ongoing work. However, is it right that individuals are being referred to the work programme if the prognosis is that they will be fit for work in three months? Are we comfortable that the precision of “fit to work” within three months, six months or any other time period is within the competency of those making the assessment?
If this benefit is to work, it must work for all—this is very important. It must be free from stigma, and it must work in a fair yet firm way. I beg to move.
Baroness Wilkins
My Lords, I support the amendment, especially to say that it should benefit everybody. The simplification of benefits and plans to taper income to ensure disabled people who can work retain more of their income has been welcomed. However, there is very deep concern in the disability community that while some disabled people will gain under the universal credit, many will be made considerably worse off. In its current form, the Bill will dramatically increase disability poverty and leave many thousands of families lacking essential support.
At the moment, a disabled person receiving middle-rate disability living allowance who is found fit for work is eligible for the severe disability premium of £55 a week, whether they are working or not and if they live alone and do not have a carer. They may also be eligible in some circumstances for the disability premium of £29 per week as a single person and £41 per week for a couple, as well as the disability element of working tax credit, which is about £50 per week if they work for at least 16 hours per week. It is not unusual for someone to be eligible for middle-rate care, but to be found fit for work. For instance, it would apply to me because I can self-propel my manual wheelchair for 50 metres. Similarly, someone who is severely visually impaired from birth is quite likely to receive middle-rate care, but be found fit for work.
However, under the universal credit, the gateway for extra support for disability will not be through DLA—or in future PIP—it will be through the work capability assessment conducted by Atos for the employment and support allowance. Under the universal credit system, unless a disabled person is put in the work-related activity group or the support group, they will get no more extra help than someone who is not disabled. These people are still disabled. They still face all the extra costs of disability not met by DLA; for instance, the need for extra help with housework, extra heating, extra laundry, help with the garden if they are lucky enough to have one. We also know that disabled people are more likely to have lower earning power and to be unable to work full-time. Let us face it, in the current economic climate, few employers are going to choose to employ disabled people over the non-disabled, and yet those people are going to lose any extra help because the universal credit will be based on the extremely flawed Atos assessment.
Noble Lords will no doubt have been inundated with e-mails and letters about this as I have, demonstrating that Atos is routinely failing to identify disabled people’s needs. I am sure the Minister will remember from his visit last week to Hammersmith and Fulham Action on Disability a young woman with mental health difficulties. She had spent six years struggling to find help. She finally managed to get therapy about six months ago, and has been progressing well when she innocently attended her Atos assessment, not realising what she was up against. Atos found her fit for work. All her benefits were stopped as of last Friday and her mental state has been set back by months. She is now in debt for the first time and she is distraught.
I know the Minister is very concerned about disabled people’s fears. As he said on Second Reading:
“The most disturbing thing that I heard today was the concerns of many noble Lords about the anxiety of disabled people”. [Official Report, 13/09/11; col. 737.]
The noble Baronesses, Lady Murphy and Lady Gale, talked about how people were terrified or petrified, and that worries me more than anything I have heard. However, those fears are very justified unless this Bill is amended. I know we will come back to this many times during the course of the Committee, but will the Minister say what steps he is taking to ensure that disabled people’s fears are met? Is he considering the proposals by the Disability Benefits Consortium, for instance, to retain the severe disability premium? Does he recognise that the universal credit risks oversimplifying needs by providing for only one disregard which ignores some disabled people’s multiple levels of disadvantage? I hope he will reconsider.
Lord McKenzie of Luton
I thank the Minister for that detailed reply. Of course I will be withdrawing the amendment. I thank all noble Lords who have spoken in favour of it and even the noble Lord, Lord Newton, for occasionally being a loyalist. It would be helpful if he did not do it too often on my amendments. We will return in some detail to a lot of the issues that the amendment touches on over the weeks, if not months, ahead. I also accept that the precise wording of the amendment could be subject to challenge. If someone wants to offer an alternative, I am happy with that. It is an attempt to put something in which is trying to be indicative of what the universal credit is about, with the focus not only on work but also on support for those who are not opposed to moving closer to the labour market and, as the noble Lord, Lord Wigley, pointed out, for those who are very keen to get back into the labour market, but for whom there are no jobs.
A common feature of many noble Lords who contributed to the debate is about the WCA and concerns over how it is being used in the universal credit for access to the disability additions. I also raise the point about how I understand that it is being used in relation to the work programme. If there are concerns about how Atos is making assessments on whether somebody is fit for work, in the work-related activity group or the support group and is struggling to do that on a basis that people find acceptable, then the added precision that apparently it is being asked to provide about whether that person is going to be fit for work in three months or six months, which drives how some of them will enter the work programme, seems to me another dimension to what it is being asked to do and therefore somewhat worrying.
When we had a briefing from officials, I asked whether any of the appeals that had taken place were around that prognosis rather than the designation that was temporarily being visited on somebody. I am not quite sure what the answer to that is. If the work programme is a key part of helping people into work, which we agree is the intention of universal credit, how Atos or the work capability assessment features in that is of some importance. The noble Baroness, Lady Campbell, raised the concern that the current assessment processes have not been co-produced. We share some of the thinking about how the WCA has been developed. It was introduced under our legislation. A lot of effort went into focusing on it, just like the effort that is going into the assessment of DLA and PIP. But when it came to the practice of it, it turned out to be quite different. I accept that it is an evolving situation, but one can understand the fear that has been expressed today and how it represents the views of disabled people more generally about how this is featuring and working in the universal credit.
The Minister did not respond to the questions around the work programme. Would he like to do that now and give us an update on how it is progressing? That is particularly important at this juncture. The previous programmes we have talked about—my noble friend Lady Hollis mentioned some of their origins—by and large were developed in an economically vibrant situation where unemployment was reducing. We are not in that environment now.
Lord Freud
I can tell noble Lords that, regrettably, at this stage it is very early days. The noble Lord will be aware that it was launched on 10 June. I do not have any meaningful data to supply him. I am not sure when I will have some, but when I do, I will let the Committee know.
Lord McKenzie of Luton
Might I ask the Minister to use his best endeavours to see that we get that data soon?
Lord McKenzie of Luton
Perhaps I can press on one or two other matters. I was interested in the noble Lord’s response about conditionality being associated with work-related activity. I accept the assurance that in respect of this Bill, that is what the focus is, but am I right in getting the hint that there may be some wider plans following this Bill where that conditionality might be applied more generally, not just in a work-related context? Perhaps the Minister would like to say something more about that.
Lord Freud
I have no information on any plans in that area at present. This Bill is about conditionality for employment purposes, and I have no information on any other such plans.
Lord McKenzie of Luton
Perhaps the Minister will let us have some information as soon as it is available to him. We are going to return to many of these issues in our further deliberations on this Bill.
The issue of travel costs has been released. Perhaps the Minister might reflect on the assertion that people should now be prepared to routinely travel an hour and a half each way to take up possibly low-paid work and how that fits with someone being better off in work if the costs of that travel are not covered or dealt with in some way.
We also had a bit of an historical debate about what various Governments did. My noble friend Lady Hollis was very clear about what happened on our watch, and as I said, the Minister was involved in some of that. I accept the assertion of the noble Lord, Lord Newton, that under his watch he did not just sit there and let the number of people on incapacity benefit accumulate. On that basis we should be in agreement that the Prime Minister’s statement was wholly misleading. It is a political point, and noble Lords may think it is a cheap political point, but it matters when the most senior politician in the land is happy to use language and examples that are simply not true. The impact of this is to stigmatise people on benefits, and we should be deeply worried about that.
Lord Freud
Let me just make it absolutely clear what the Prime Minister was saying in the slightly more technical language that we understand in this Committee. The Prime Minister was making the point that we had created a series of inactive benefits onto which people were put and then left without any route back into the workplace. That was a dereliction of duty by Government. Our understanding has now transformed. We know that work is part of the solution for people with disabilities, not part of the problem. A key thing that we are trying to do in this Bill is to integrate the work process for people, whether they have disabilities—whoever they are. That is what the Prime Minister was saying. We are making an enormous effort to get people back into the workforce, and we are spending a lot of money—up to £14,000—on the people who are hardest to help, many of whom will have a disability. Underneath the political rhetoric, I think all noble Lords would agree with that sentiment.
Lord Freud
I think we had the discussion about Remploy yesterday, and I will not go on about it again today.
Lord McKenzie of Luton
My Lords, I would just remark that if that is what the Prime Minister was intending to say, his usual high command of the English language eluded him on that occasion. My noble friend Baroness Wilkins emphasised the fear that people have about this process and about the WCA. My noble friend Lady Hollis was quite right to refer to carers. In fact, my shorthand amendment was meant to encompass that and I entirely accept the point. I am increasingly concerned about the impact of this on young carers as well. The noble Lord, Lord Wigley, referred to support for work. He is right, it should not only be about supporting people linked to the labour market. It is a question of how we are going to increase growth and create jobs as well, which is a much wider debate.
My noble friend Lord Beecham made reference to the housing benefit changes and the impact that those will have on labour mobility. I think that the noble Lord referred to people not losing out from universal credit. When you look at the impact of universal credit and some other measures in the Bill, particularly the benefit cap and housing changes, I am not sure that that assertion would necessarily hold true. Having had a good start to proceedings today, we will revisit many of these issues.
The Earl of Listowel
I apologise for coming a little late to this debate, but there is an important point on which I would like some clarification. The Minister in his response said that we are trying to move from a complex system to a simpler one. That resonates with me, having listened to what Professor Eileen Munro has been trying to do with social work, where there was a very complex, bureaucratic system and they have tried to move to a more simple system. But they have discovered that the professional judgment of people at the front line becomes particularly important. The way they use their discretion becomes much more important, and listening to the noble Baronesses, Lady Wilkins and Lady Campbell, and the way in which some of these complex cases are being dealt with by people at the front line reminded me of what my noble friend Lady Meacher said about the importance of training people who work on the front line. It perhaps also reinforces the point I have made in the past about making the culture of the organisation in which people work sensitive to the needs of those who may be mentally ill or vulnerable, and who may respond very poorly to people who seem to be persecuting them in the way they are pursuing them. Have I understood that correctly or is the Minister referring to a different paradigm?
Lord McKenzie of Luton
I think we would all support the concept of a system that was simpler and more readily understood. It helps with take-up, which is the point that the Minister made; we accept that. As we go through the Bill we will examine in fact how simple we can make the system. People have complex and sometimes very chaotic lives. How easy it is to distil those issues into a very simple system and still maintain fairness is one of the challenges we face as we go through the Bill. I readily accept the need to provide full support for people, particularly those at the front line. In a sense, we have an interesting situation in which the work programme, the “black box” approach, gives a lot of discretion in that respect to those working at the front line, but at the same time we have a universal benefit which is more constrained and potentially more restricted. Having said all that, it is probably time to withdraw the amendment, at least for the moment.
Lord Wigley
My Lords, I hope I will not distress my noble friend Lord Foulkes unduly by supporting what he said. I preface my remarks by supposing that there will not have been the studies in the National Assembly in Cardiff that he was calling for in Edinburgh, but I will not castigate the Labour regime in Cardiff for not undertaking such studies. The point, however, is a material one. In the eight months that I have had the opportunity to speak in your Lordships’ House, I have realised that in many Bills—I think of the Police Reform and Social Responsibility Bill, the Localism Bill and the Public Bodies Bill—there are implications for the devolved Administrations as a result of changes in legislation here that do not always become apparent on first appearance.
In the context of the knock-on effects of this Bill, there will most certainly be implications for the housing sector because most of the responsibility for housing rests with the National Assembly, but housing benefit does not, and there is going to be interplay. There will be an impact in the realm of carers. The initiatives taken in Wales have not been quite as radical as some of the ones taken in Scotland, but none the less there is a bearing if the state takes certain responsibilities in Scotland, Wales and Northern Ireland that are not undertaken in England with regard to the support that is given. There has to be at least an understanding of how those two factors may work.
With regard to the opportunity for work and training, again responsibility will lie with the devolved Administrations. There needs to be an approach across government to legislation that is going through Westminster in general to take on board the knock-on effects. There needs to be a systematic approach to co-ordinating them. It may well be that your Lordships’ Chamber has a role to play in that.
The system of devolution that we have is unbalanced. I can well understand that that causes difficulties for those who are framing legislation in London when the interpretation and the interactions will be different from area to area. What has also become apparent to me is that in the context of matters that are totally non-devolved, there is still an implication for the National Assembly, and that in matters that are totally devolved, there is an implication here, from cross-border issues, from consequences of the Barnett formula and so on, where there is an interplay. Therefore in both areas one cannot just assume that there is a sealed border and there should not be a discussion.
I would have hoped that, in raising the issue at this stage—and it could be raised at any stage going through this Bill—there will be the approach of thinking “is there going to be any direct bearing with regard to the legislatures in Scotland, Wales and Northern Ireland?” If so, these can then be built in and assurances given at the appropriate time that they will be taken on board. That would be helpful for the progress of the Committee.
Lord McKenzie of Luton
I thank my noble friend Lord Foulkes for picking up the baton from the noble Lord, Lord Kirkwood, so that we have the chance to have the explanation of the points that were put by my noble friend and by the noble Lord, Lord Wigley. Doubtless the Minister will be able to tell us what consultation and engagement has taken place, but I think that the request is that it is not simply done at some formal stage, perhaps when policy is being formulated, but that we consider it as an integral part of our consideration of this Bill. If we can get nothing other than that from this amendment it will have been worthwhile preserving it for our brief debate.
Lord Freud
My Lords, I will deal with Amendment 3, which is the one noble Lords have concentrated on. Amendment 3 would introduce a requirement to consult the devolved Administrations before the introduction of universal credit. I must point out that social security is a reserved matter in Great Britain but the implementation of universal credit will have an impact on some matters of policy which are devolved, for example, housing, skills provision and childcare. For that reason, we are working closely with the devolved Administrations on the implementation of measures in the Bill and will continue to do so to ensure that the introduction of universal credit goes smoothly.
We have been discussing aspects of the Bill since well before its introduction during the latter part of 2010. The Secretary of State and I have had a number of meetings with Ministers in the devolved Administrations. A formal role has also been established for the Scottish, Welsh and Northern Irish Governments and for the Scottish and Welsh local authority associations on the universal credit senior stakeholder board. We have a concordat between DWP and the Scottish Government that sets out the commitment on communication and consultation; indeed, the Secretary of State met Scottish Ministers most recently a fortnight ago. I therefore hope that noble Lords will be reassured with regard to the concerns they have expressed. We are addressing these issues, we are consulting thoroughly, and on that basis—
Lord McKenzie of Luton
My Lords, I am not quite sure what was in the mind of the noble Lord, Lord Kirkwood, when he drafted the amendment. He may want to take the opportunity to enlighten us. But looking at the distinction between “awarded” and “paid”, our attention was drawn in particular to Schedule 1, paragraph 6. This paragraph enables an award of universal credit to be paid in whole or in part by means of provision of a voucher. Perhaps the Minister could expand on the intention behind this paragraph, and on the circumstances in which it might apply. I am aware, of course, that there are existing programmes where vouchers are used: in health, for example, for specs and contact lenses and for the Healthy Start food initiative. I know that the Minister has turned his mind to vouchers in the past. I think it was in connection with the sanctions regime on an earlier piece of legislation we were debating. Does this provision herald a new approach, or does it simply look to replicate existing arrangements? If so, what are they? I beg to move.
Lord Freud
My Lords, regarding the reference to vouchers in paragraph 6 that the noble Lord, Lord McKenzie, picked up—very sharp-eyed, as I would expect—we are looking at an option of paying childcare through vouchers. It is similar to some of the ways currently used by employers. It allows the flexibility of a parallel system with the employer system. I have to tell noble Lords that it is not the approach we are expecting to use. It is very much an option, but as I intimated earlier, we will announce our childcare proposals very soon.
On the voucher system, we have used the term “award” here because it is widely used across social security legislation and therefore makes a link to other legislation that provides for claims, payments and appeals. Changing the word would remove those links and require major changes in legislation across the piece. For that reason I ask for the amendment to be withdrawn.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for that explanation. I have no particular problem with the term “award”: it was just the passing reference to the use of vouchers. I took it from the Minister’s reply that it is only in relation to childcare that this is to be developed, and that does not look as though it is the front runner. We will know that soon. The only plea I would make is that if we go down the path of vouchers, we should do so sensitively. The prospect of stigmatising people who access facilities by paying cash or providing a DWP voucher has significant ramifications. It appears from what the Minister says that we will not have to face that in practice. On that basis, I beg leave to withdraw the amendment.
Lord Skelmersdale
My Lords, we have heard an enormous amount of words, some of them very persuasive, for this amendment. But I find myself remarkably schizophrenic about the whole thing. The noble Baroness, Lady Turner, put her finger on at least half my schizophrenia.
Universal credit is a cash sum. You get it in your bank account, through your giro, from the post office or wherever. Council tax benefit is exactly the opposite. It is a discount; you do not see the money. Therefore, I can see that it ought to be treated in a totally different way from universal credit. On the other hand, you cannot live in a house without paying council tax. This is where my schizophrenia comes in. From your lump sum of universal credit, you are going to pay your rent, and so on, but you have the likelihood of outgoings and you cannot from those outgoings separate out the council tax that you are also going to pay. I wonder whether my noble friend Lord Freud can solve this great dilemma that I have.
Lord McKenzie of Luton
My Lords, I will speak briefly on this issue in support of the amendment proposed by my noble friend Lady Hollis and the exceptionally powerful case made by her and by pretty much every other the noble Lord who has spoken on the issue. The noble Lord, Lord Skelmersdale, raised an interesting point about how you would extract the payment. My noble friend Lady Turner asked whether it was a rebate, a discount or quite what it was.
I recollect that she pressed us in Government on behalf of the Royal British Legion, who were campaigning to have the term rebate replacing the benefit. We all signed up to that at the time. I am not quite sure what progress was made. I think that it went to local authorities. However, I remember that there was a potential price tag of tens of millions of pounds to local authorities just for that one system change. These are not inexpensive projects that we are dealing with. I cannot believe that this is what the noble Lord or the DWP want. The noble Lord is an exceptionally logical person. He analyses things. The scale of the problems that the localisation of council tax would bring seems to me to be totally out of kilter with all of the work and analysis that has gone on in producing plans for the universal credit. As everyone has said, it undermines the universal credit—the benefits of the single taper in particular. With all the raft of issues about how people would understand what their position was, the simplicity of the system would fall away.
We had a meeting with officials. As ever they were very helpful. We explored this issue a little bit. My understanding is that it was not until March of this year that the department started to contact local authorities to get their minds around how it would work. To produce something in a Bill and develop a policy on an assumption that this component can be dealt with separately without any clear knowledge as to how that will work in practice seems unusually foolhardy. Again, I cannot believe that the Minister believes that this is the best way forward. There are lots of practical issues. We know lots of local authorities will have outsourced their arrangements in respect of housing and council tax benefits. You would have to break the costs involved in the multiplicity of contracts. I do not know if the Minister has any idea of what would be involved in that exercise.
What we are seeing here is what we have seen in the Localism Bill writ large. There have been a lot of instances where the Government and the Secretary of State have said that they want to devolve power and give more freedoms to local authorities, but have then realised the consequences and drawn those back with all sorts of regulation powers, which, as my noble friend Lady Hollis said, would have to be there if you were going to make any sort of sense of this proposal to have any sort of understanding of whether it is regional systems, which are common.
There is another component as well. It relates to the cut in the total amount available. I agree with the noble Lord, Lord German, that in a sense there are two issues: the financing and what cash sum is available, and how it should be dealt with. This Government have a record of imposing on local authorities and getting them to take the pain, the heat and the difficult decisions, and seeking to walk away scot free. We will see and debate what is going to happen with the social fund. That is another example—no duties on local authorities and no ring-fenced funding from it.
My noble friend Lady Hollis made a telling point. If our understanding is correct—and the Minister will doubtless confirm this—this is switching AME to DEL, the reverse of what I think the Minister himself negotiated so effectively when he was dealing with work programmes. It does not make any sense. I know that the Minister has to do his job. We have all been in the position of defending the indefensible before. However, I cannot believe that it is going to end up as currently proposed because it would seriously undermine the universal credit and all the good work that the Government are trying to do on that.
Lord Freud
My Lords, I am grateful to noble Lords for raising this series of amendments. Clearly a point of real substance has been discussed this afternoon. The group of amendments would have the effect of incorporating help with council tax for those on low incomes into universal credit and state pension credit.
Noble Lords will be aware that we are proposing to abolish council tax benefit and replace it with localised schemes of support to be set up and run by local authorities. The Department for Communities and Local Government is currently consulting on proposals for local schemes in England, as a number of noble Lords have pointed out. This approach will allow local authorities, who determine and administer this tax, to have a say in how the burden of paying for services is shared across their local community, taking account of local priorities.
The Government’s approach addresses concerns that have often been expressed about the complexity of council tax benefit and, particularly, that council tax support should not be part of the social security system at all. Nevertheless, in localising support, we need to ensure that the improved work incentives that universal credit will bring are not undermined in any way. We believe that the key principles required to incentivise work can be delivered through local schemes and therefore that localisation is the right approach.
Lord McKenzie of Luton
My Lords, this is a probing amendment, which would delete subsection (2), which states:
“Regulations may specify circumstances in which a member of a couple may make a claim as a single person”.
As I say, it is a probing amendment to seek some clarity as to the likely scope of such regulations. I accept that the Notes to the Bill refer to circumstances where one member of a couple does not have the right to reside in the UK and is not entitled, so the other member will be able to make a claim as a single person. My question is: what other circumstances might be envisaged? It is understood from the notes circulated that further work is ongoing in this regard, but perhaps the Minister can help us with the following questions. When, for example, a couple are in the process of separation or divorce, will they be treated as being a couple or two individuals? Under what circumstances will members of a couple be legally entitled to live separately and receive universal credit independently of each other? In particular, will there be any scope for individuals who are in an abusive relationship to receive universal credit independently of their partner?
These sorts of issues highlight how convoluted some people’s lives can be. There are circumstances where, under existing provisions, people are treated as no longer being a couple: for example, if either or both is in custody, has been released on temporary licence from prison or is a compulsory inpatient detained in hospital under mental health provisions. Those sorts of arrangements exist at the moment. Are they going to be built in to universal credit? In what other circumstances might a member of a couple claim as an individual? I beg to move.
Lord Freud
My Lords, to summarise, the general principle is that a couple should make a joint claim for universal credit to ensure that both members of the couple take responsibility for the claim and obtain support to find work, where appropriate. This principle is already established in jobseeker’s allowance for joint claims, and we are extending it to universal credit, so that both members of a couple will have equal opportunity to access the support.
As explained in the briefing material sent to Peers last week, there will be a fairly limited range of circumstances in which only one member of a couple is eligible for universal credit, such as the example that the noble Lord, Lord McKenzie, raised where a claimant’s partner is a person from abroad who has no right to reside here. However, there are other circumstances, such as when people are students and so forth, when they will not be eligible for benefit support.
This amendment would remove our ability to make these exemptions. I understand that it is a probing amendment implying a series of questions. We are currently developing detailed regulations on this. There is no intention to change some of the existing protections—the noble Lord mentioned people in custody and people detained in hospital. In the work we are doing, as we build a coherent single system, it is fascinating to see how many different definitions of the same thing there are scattered through the current system. One thing we are doing is trying to get a consistent definition. We have four meanings of the word “work”—or is it five? When you are writing a computer program in code, that kind of thing needs to be precise.
We are going to have to get the timing of when people separate and all that precisely right, and that is work in progress. We are aware of the issue. It is being addressed, and it will be much more coherent than it has been in the past for that reason. Therefore, I ask the noble Lord to withdraw this helpful probing amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that information. I am going to have to allocate a bit more of the weekend to catching up on all the briefing material that we have. I understand that there is no basic intent to change the current provisions. I am interested in the range of different definitions. The next group of amendments will touch on that a little as well. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I shall speak also to the other amendments in this group. Amendment 17 would make the minimum age for universal credit 16 rather than 18. This issue was raised in the other place but, despite assurances, we continue to hold the view that this matter should be reflected in primary legislation. Currently 16 and 17 year-olds are able to claim means-tested benefits if they are in a vulnerable group. Such groups include lone parents, carers, those estranged from parents and those with limited capability for work. They can claim JSA if they would otherwise face severe hardship. Housing benefit can be claimed to meet liability for rent, and they can claim working tax credit if they are responsible for a child or a have a disability.
There are two points that I wish to pursue with this first amendment. Given that there is a bit of a patchwork at the moment with separate benefits, can the Minister put on record what the rules will be under universal credit for 16 and 17 year-olds? Will all the strands of support available via one benefit or another under the existing patchwork of benefits and credits be available in universal credit, and what conditionality will apply? Why not at least encapsulate in primary legislation the prospect of 16 and 17 year-olds accessing universal credit? We accept that Clause 4(2) provides a route for overriding the provisions of Clause 4(1)(a), as does Clause 4(3), but why not have it the other way round and set the 16 and 17 year-old ages in primary legislation?
Amendment 18 is a probe, the purpose of which is to understand other circumstances in which regulations may provide for exceptions to the requirement to meet any of the basic conditions. Can the Minister help us on this? He may again say that this is buried in the mass of notes and draft regs that we have had delivered to us this week. If he does, we will catch up with him soon. Let us get it on the record here. Are there any parallel easements in current benefit and credit provisions that are not being carried forward?
Amendment 19 similarly probes the circumstances in which it is expected that the regulations in Clause 4(5) will be used. Current benefit provisions cover a range of conditions—namely, presently resident and ordinarily resident—and the basic conditions for universal credit require somebody to be in Great Britain. Will the Minister explain why this formulation has been adopted? What, if any, are the EU ramifications of this formulation? The UK has a number of social security treaties. Will they automatically cover universal credit or will there be a need for some renegotiation or changes to those treaties?
Finally, Amendment 20 is a probe to understand what the regulations may say about who is receiving education and who is not, and therefore who is entitled to universal credit and who is not. It is quite right that most students should rely on income from student support, family or work, but I hope that the Government will not remove entitlement from groups that currently have it. This is what the amendment seeks to put in the Bill. This is an example of where there are different rules for different benefits. Perhaps the Minister will accept that universal credit should be available for students who are parents, lone or otherwise; individual single foster parents; those who have disabilities or are vulnerable and therefore qualify because they are young or living away from parents through difficult circumstances or were previously in local authority care; and those who are refugees studying English. I think those are the current types of arrangements which enable benefits to be accessed. Perhaps the Minister can say the extent to which these will be replicated under the new system. I beg to move.
Lord Freud
My Lords, Amendments 18 and 19 seek to amend the basic conditions of entitlement to universal credit and would in effect limit our ability to provide for exceptions to those conditions. Amendment 20 would create a new regulation-making power to set out circumstances in which certain groups are to be treated as not receiving education: specifically, young people, parents and disabled students. Clause 4 sets out the basic conditions that must be met in order to be entitled to universal credit. These basic conditions are designed to be simple and easily understood, fitting together with the support for people in education and for older people through state pension credit. However, as I am sure noble Lords will agree, there are always exceptions to the general rule, and it has never been our intention that these basic conditions will be so prescriptive as to prevent certain groups of people being entitled to universal credit. In that sense, we are entirely in accordance with the sentiments just expressed by the noble Lord, Lord McAvoy.
Amendment 17 seeks to make universal credit adopt the principle that entitlement to support begins at 16 rather than at 18. We intend to maintain the current rules where 18 is the minimum age. This is consistent with the approach taken by the previous Administration, and we see no reason to change it. Equally, however, there are circumstances where people aged 16 or 17 should be entitled to universal credit in their own right. This includes people with responsibility for a child, disabled people and people estranged from their parents. Sixteen and 17 year-olds should be in education or training and not living on benefits. If we were to set the lower age limit to 16, we would send the wrong message to young people and their parents about the value of education and the strength of the family unit.
We will continue to support young people who find themselves in straitened and difficult circumstances through leaving care, family break-up or whatever, at the age of 16. We are not planning to change the rules for care leavers in any way. However, as a result of the last Government’s Children (Leaving Care) Act, care leavers cannot usually claim benefits until the age of 18. That is why the Bill makes provision in subsection (3) of this clause, and why I do not think that the amendment is necessary.
Amendment 18 seeks to remove the regulation-making powers that will allow us to provide for exceptions to the basic conditions. While we would still be able to specify some of them through other subsections of the clause, the amendment would limit our ability to make provision in all cases. I am sure that noble Lords will appreciate the importance of flexibility in these matters. The power can in any event be used only to extend eligibility, not restrict it.
Amendment 19 would remove subsection (5), which allows us to make regulations in respect of residence and presence. We have been clear that migrants will generally be able to claim universal credit only if they have a right to reside here and are habitually resident. This position has not changed—and was reiterated by the Secretary of State and Minister for Employment just last week. In the tough financial conditions we currently face, it is particularly important that UK taxpayers should not have to subsidise people with very tenuous links to this country. “In Great Britain” is the same formulation as in the primary legislation for income support. Nothing sinister is implied by the wording.
On the question of the noble Lord, Lord McKenzie, about the EU ramifications, we do not expect to have to renegotiate social security treaties, although he will be aware that there is considerable movement currently going on about export of benefits, which we are concerned about. Removing the powers in this subsection would also prevent us providing for circumstances in which a person can be treated as being in Great Britain although they are temporarily absent. Current provisions allow us, for example, to pay benefits to people who may have gone abroad for a short period of time to receive medical treatment for themselves or their children. They also, in the case of tax credits, ensure that service personnel and their families are not prevented from claiming because they have been posted overseas. We want to replicate this position within universal credit. The amendment would prevent us doing that. This is a valuable thing for us to be able to do: I am sure that that is not a contentious claim to make in this Committee.
Amendment 20 would require the Secretary of State to specify the circumstances in which certain groups will not be treated as receiving education. There is a long-standing principle that in general the benefits system should not be a source of financial support for those within the education system. Young people are primarily the responsibility of their parents until they leave school. Students in higher education have access to a comprehensive system of student loans and grants. However, there have always been exceptions to the general rule and, as the Minister for Employment made clear during debate in the other place—and I am happy to repeat here—the current boundaries that exist in relation to income-related benefits will not be redrawn.
We do not wish to widen the extent of support for those in education. Nor do we intend to remove support from those groups of young people and students who currently receive it under the current system, such as lone parents, disabled students and youngsters in non-advanced education who are living independently. The powers we need to do this are already contained in subsections (2) and (6)(b) of the clause. We do not need to make the extra provision that this amendment would provide.
I apologise if that was a lengthy summary of our position. I need to track back a little bit because I may have inadvertently misled noble Lords on the point of support for care leavers. I want to make absolutely clear with regard to care leavers that our support is constrained by the previous Government’s Children (Leaving Care) Act, which starts the clock for them at 18. I think that I inadvertently said 16 earlier and want to make sure that that is absolutely clear and on the record. With that explanation and assurance, I urge the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
I am grateful to the Minister for that explanation. As I hope I explained, these were probing amendments to get answers on the record.
I shall follow up on two points. On Amendment 17 concerning16 and 17 year-olds, there are currently different rules for different benefits. There is the JSA rule and rules for other means-tested benefits. For the latter, you must be in a vulnerable group: for JSA, you must be facing severe hardship. Given that we end up with just one benefit, universal credit—plus a bit of council tax—will all the easements for 16 and 17 year-olds be reflected in the universal credit, or only some of them? As I understand it—I am not sure that I have my mind fully round this—there is currently a patchwork of provision, and it is a question of seeing whether that is brought forward in its totality.
That is the first question. I will pose a second one as I see that the team are working hard at the back there. In relation to definitions around residence, I think that the noble Lord said that “in Great Britain” is used for income support. Certainly, the text that I have is that you must satisfy the “habitual residence” and “right to reside” tests and be “present in Great Britain”. I accept that there is nothing sinister in it, but I am trying to understand what “in Great Britain” actually means. Does it mean physically here, and that you have to remain physically in Great Britain throughout the period for which you are seeking to claim? What about periods abroad for whatever reason? It looks to me as though that is a change of formulation. It may just be an attempt to simplify the language, but I am a little mystified by it. Perhaps the Minister can help.
Lord Freud
Yes. On the first question about all the rules, our intention, from the policy principle area, is to reflect the current rules. I am hesitant to make an absolute commitment because I am conscious of our work to smooth them out, and there may be some wrinkles. Wrinkles do appear in this area, surprisingly. The main principle and direction will be to take them over in their entirety in the universal credit. Clearly, to the extent that there are wrinkles, when we get to regulations—in some time—we will end up discussing them. We will be able to look at that and discuss it at the appropriate time, but that is the general policy intention.
The expression “habitual residence” is the one used in secondary legislation. That reflects what the primary legislation says, which is “present in Great Britain”. That is the relationship. Clearly, “present in Great Britain” now has a case-law framework around it to define what it really means. Can you pop over to Calais for lunch and still be present in Great Britain?
Lord Freud
There are some very cheap fares now; £12 return on P&O, I think. So maybe even on JSA you can have the occasional treat. Joking apart, there is a context and an understanding. We are not planning to change that. Clearly, when one abandons those key words it has a lot of ripple effects, not least in the social security treaty network that we have.
Lord McKenzie of Luton
I am grateful to the Minister for each of those additional explanations. I understand the point about the terminology being primary and the secondary legislation having these other descriptions. Could I ask the noble Lord about this current debate on the exportability of benefits and their components? How, if at all, does he see the universal credit fitting in to that debate?
Lord Freud
We expect the universal credit to be treated as social assistance, which is within the rules, so we can keep a reasonable amount of control over it. This is something that is causing great concern to countries throughout Europe. The European Commission is taking infraction proceedings against us. Twenty members have expressed strong concern. Fourteen member states have joined the UK in calling for a debate on the matter with a view to amending EU social security rules as soon as possible. This is a live and changing issue but currently, as we understand it—nothing is locked down in this area—we have designed the universal credit in a way that it is protected from some of the exportability concerns. That is our intention.
Lord McKenzie of Luton
I am grateful to the Minister for those explanations. At some stage may we have a little note which sets out the existing benefits and components that are going to go in to universal credit and what the exportability issues and access by non-residents are? That would be helpful to us. We accept that this is a moveable feast, but a note based on our best understanding as of today?
Lord Freud
Having checked with my officials, I am happy to provide a letter summarising the position. I have had a reasonably recent brief on it, and although I cannot remember the detail, I will get the salient points circulated.
Lord McKenzie of Luton
I am grateful for that and for the other explanations we have received. I beg leave to withdraw the amendment.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(13 years, 1 month ago)
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Lord McKenzie of Luton
My Lords, I think that the noble Lord, Lord Kirkwood, has got us off to a really good start to our considerations on this important Bill. I do not want to dwell on the issues of the Room and where we are meeting. It is a matter for other channels: the usual channels. I think the Government made a mistake in putting everything in Grand Committee, but having done that I think they have worked quite hard to configure this Room so that hopefully we can have sensible debate on this important measure.
We have added our name to the noble Lord’s clause stand part debate, but let me start with his Amendment 1. We have a great deal of sympathy with this, because he is technically correct in saying that this is not a universal credit. It is not a universal benefit; it is a means-tested benefit. It is not universal in the sense that it is a substitute for all other means-tested benefits, either. Council tax sits outside it, as does the partially means-tested child benefit. Other non-means tested benefits rightly sit outside it—DLA and its replacement, the personal independence payment, in particular.
As the noble Lord said, though, “What’s in a name?”. What we are dealing with is the integration of a number of benefits through this system. I agree with what he said about the use of language and how careful we need to be. One of my questions to the Minister is: since we read in the newspapers that Secretaries of State are scurrying around Manchester and other places at the moment trying to dream up ever-more draconian conditionality to the welfare benefit system, is there anything in particular that the noble Lord anticipates bringing forward in that respect, as amendments to this Bill?
As I said at Second Reading, we always seem to end up in a place where those on benefits are benchmarked—in an adverse way—against a hard-working family who pay their taxes, not recognising that that hard-working family themselves could, next week, be availing themselves of the benefits system, because they have lost their jobs, or there has been an accident, or they have suffered ill health. We need to get away from that. I exonerate the Minister, who I have never heard adopt that language, but frankly some in his party do, pandering to the tabloids, which is, sadly, what this is about.
Universal credit is something which we, in principle, support. It covers those in work and those out of work, and therefore potentially removes the fear that entering work will cut away a support system. The prospect of one source of support rather than fragmented sources, from HMRC, DWP, and local councils, is broadly to be welcomed. The clear and significant income disregards and a common taper add to its attractions for improving work incentives. But this is not a panacea.
It is still going to be complicated, and there are problems with work incentives, for example for second earners in a couple. There are still very significant unknowns, more detail about which we will seek to elicit in the upcoming weeks, as we scrutinise the clauses in the Bill. Whether the universal credit can lay claim to making all people better off in work depends crucially, of course, on support for childcare costs. We will press for clarity on this matter, as we know others will as well.
There are gaps around passported benefits, treatment of the self-employed, and payment of rents. The SSAC, referred to in the presentation by the noble Lord, Lord Kirkwood, published a response to the White Paper on the universal credit, and highlighted issues such as, for example, whether the DWP has modelled the potential impact of second earners moving out of work. Perhaps the Minister can let us know on that issue. It makes reference to MDRs actually increasing for working households paying income tax and national insurance but which do not receive housing benefit or council tax benefit. Perhaps the Minister can also say something about the other complexities that have been pointed out about how the universal credit will deal with situations where, for example, one member of a couple is employed, the other self-employed; or a household comprising persons employed by a number of different employers.
Of course, the overriding issue is the deliverability of proposals. If the Telegraph is to be believed, Treasury officials have told Ministers that these reforms are,
“in serious danger of arriving late and billions of pounds over budget”.
Can the Minister please tell us whether a team of senior Whitehall officials and industry experts has been assigned to investigate the development of the universal credit? Is it true that the DWP rather than the MoD is now at the top of the Treasury’s risk register? I accept it might be the HMRC’s bit that is causing this to happen and not the DWP, but is it true? It seems that we are being asked to rush through a Bill where there are major gaps in how it is intended to work and concerns at the very top of government about the timing and costs of its delivery.
I refer the noble Lord to HMRC’s Improving the Operation of Pay As You Earn: Collecting Real Time Information, the summary of responses that was issued on 30 September. The ability for these systems to deliver that is crucial to the universal credit and in a number of places both employers and software providers have raised real concerns about the challenging timetable for introducing it. In particular, they say in paragraph 3.13 that:
“Of those respondents who expressed a view on the proposed timescale for the introduction of RTI, as set out in the consultation document, 75 per cent thought it unachievable. Views from those attending consultation meetings echoed this. The timetable for the introduction of universal credit means there is no flexibility in terms of the ultimate go-live date of RTI. HMRC’s priority is therefore to migrate the largest number of employments into RTI as quickly as possible—a necessity for the introduction of universal credit—whilst putting in place a migration approach which will protect the overall robustness of the system”.
We will come back to this issue with subsequent clauses in the Bill but at this juncture, at the start of our deliberations, we really ought to have an update on what is happening on deliverability in light of these particular comments and publications of HMRC.
I agree with the noble Lord, Lord Kirkwood, that this is not a perfect Bill. We will certainly have common cause with those who wish to press on some of the issues, not particularly around universal credit but some of the other issues around housing benefit and benefits caps generally, and under-occupation, which frankly I see as wicked in some respects. I hope that we can have common cause not only in having a rhetoric which we would support but actually translating that into voting to change this measure.
To conclude, I echo what the noble Lord said about thanking the Minister and the Bill team for being available on a very consistent basis so that we can actually get fully to grips with what is a very significant change to the system. I hope that in the next amendment we will open up this issue of what the universal credit should be for. Perhaps I should deal with my comments there rather than in response to this first group of amendments, but we also need to reflect on the process that everything is driven by work incentives and everybody who is on benefits lacks a motivation to work. I do not believe that to be true but I will seek to expand on that when we consider the next amendment. Having said that, if the thrust of the universal credit could be made to work and deal with the issues about which we have concerns, I think that would be a real gain for our country, but we are a long way from that and there are too many unanswered questions. I hope that during our deliberations we can get some further information on at least some of those very vital points.
Baroness Campbell of Surbiton
I am sorry, my Lords, I wish to make an addition to my comments. In my eagerness to thank the noble Lord, Lord Kirkwood, I forgot two very important things. One was that I wanted to thank the Bill team and the noble Lord, Lord Freud, for all their help that they have given to me personally and to people who I have been working with in trying to get my head around this very complex Bill. I am sorry that I forgot my thank-yous.
The other is that the Committee will know that I was one of the people who complained bitterly about coming into this Room. I am afraid that I am not happy that we are here. Yes, I love this lovely desk and the fact that my PA is able to help me to drink, but three important things were forgotten. First, no one asked me what it was going to be like for me to participate in this Room. No one came to us, and that is the lack of consultation that we often complain about outside this building to local authorities. In the Disability Discrimination Act, the number one rule is that you must consult, but no one consulted me personally.
Secondly, it is a good job that I have an Olympian, the noble Baroness, Lady Grey-Thompson, next to me, because she can reach to push the button on this microphone. There is no way that I can do that. No one asked me, and I do not particularly like having to ask every time that a thought comes into my head and I wish to intervene.
Thirdly, the reason why I have that office on the Principal Floor, probably three minutes away from the Chamber, is that at any moment I may have to leave the Chamber and go to my room where I might be assisted to breathe properly. It is dangerous in this Room.
I wanted Members to think about that and remember that consulting the person who experiences impairment is the number one rule. I do not want to shame noble Lords, but I have to tell them this because it is important that we in this House remember equality for all. Sorry about that.
Lord McKenzie of Luton
I am very disturbed to hear what the noble Baroness, Lady Campbell, has just said about lack of consultation. In our dealings with the Whips Office we made it clear that what might be satisfactory to us would have to be also satisfactory to the noble Baroness and her colleagues. We made it clear that we could settle on an alternative room only if it had the noble Baroness’s agreement. If that has not happened, it is a real failing. Perhaps we cannot do anything about it now, but I ask the Minister to take that issue back, as we had assurances to the contrary.
Baroness Thomas of Winchester
My Lords, I would like to add a brief word. I hope that the Committee does not mind if I do not rise to my feet, as it would take rather a long time. I, too, am disturbed by what the noble Baroness, Lady Campbell, has said, but I think that the people who have done the work in this Room have done a terrific job and I commend them. They have worked extremely hard to make the Room as comfortable as they possibly could, and they have done a much better job than a lot of us thought they would be able to do. I am sorry that the noble Baroness, Lady Campbell, was not consulted but they have done a good job in making the Room comfortable.
Lord McKenzie of Luton
On the impact of the taper rates, does the Minister agree that, if you have council tax benefit or its replacement outside the system, you simply cannot be sure what the effect of the withdrawal and taper rates will be? Can you include that benefit?
Baroness Hollis of Heigham
I reinforce my noble friend’s point. As every council tax taper will differ from district to district, and there are some 300 to 400 of them, it will be impossible for anyone to predict who gets what.
Lord Freud
Yes. Picking up on that point from the noble Baroness, Lady Howe, one of the most complicated areas in practice is not the development of the IT system; it is the interface between the user and that system. We must develop, and are developing, a sophisticated set of gateways. There are a lot of issues to get right surrounding identity assurance, ease of use—which we are doing a lot of work on—and where you go to get access when you do not have broadband in your home or do not necessarily understand how to use programs. Getting that help right and balanced is something that we are spending a lot of time and energy on. I accept the noble Baroness’s point: that is one of the key issues to get right.
Lord McKenzie of Luton
The noble Lord is clearly impressively knowledgeable around all this. He said that the systems were being built in layers, and that he would be able to demonstrate to us that some of them are actually working now. Are they working on the basis of collecting real-time information for the individuals represented in those layers?
Lord Freud
No. I shall explain to the noble Lord, Lord McKenzie, exactly how this works. We are building a system so that certain types of people can apply and run their universal credit. That is not a small trial; that is the mainframe system equivalent. The first type is a simple claim; I think he is personified as “Tom”—I forget his surname. We have pulled in a lot of Toms and run a customer insight with them to run through how they would interrelate with the system. The next stage has been to work out how we have a joint claim. Yasmin and Liam are the two joint applicants. They are both committing as a joint claim because it is a household claim.
Noble Lords who are interested in this area—I suspect that quite a few are—will find this fascinating as we run through it. I am waving my hands to try to give the Committee an image, but I cannot do it. I much prefer to have a screen to run through things on.
I want to leave noble Lords with a reassurance that this is happening. The programme is going to time, and it is going to budget.
Welfare Reform Bill
Lord McKenzie of Luton Excerpts(13 years, 2 months ago)
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Lord McKenzie of Luton
My Lords, this has been a powerful, knowledgeable and passionate debate, as it should be, given the issues at hand. I congratulate the noble Lord, Lord Feldman of Elstree, on a very impressive maiden speech, and I look forward in the future to more of his contributions, and indeed to his stories. I had expected to hear about the iron triangle, but not from the noble Lord, Lord Boswell. I had not expected to hear a treatise on the family sizes of the Pakistani and Bangladeshi communities, and hope that I do not again.
I thank the noble Lord, Lord Freud, for the manner in which he introduced the Bill, for the extensive surrounding briefings and for the accessibility of the Bill team. I thank him again for his promise of further information, and it would be good to have a schedule of what is upcoming, particularly in relation to the Committee timetable. We acknowledge that the Minister is a pioneer and a true believer in the universal credit, and someone who is always evidence-led in his approach to policy. But his difficulty is that what is before us is a proposed credit that is not universal, and a universe in which there are too many black holes. I see the noble Lord not so much as a Che Guevara but perhaps as a Captain Kirk boldly going forth with a few warp factors involved. Of course, the universal credit provisions sit alongside measures that are known and which are deeply concerning. These arise in the context of the £18 billion of cuts to benefits before the universal credit sees the light of day, so assurances that there will be no losers, frankly, ring a little hollow.
We have had the timely and devastating report from the IFS which concludes that the Government’s economic strategy will give rise to greater inequality and rising child poverty, putting into reverse progress made in the years of the last Government. Indeed, if unchanged, the Bill will help to deliver this outcome for the Government. It is an outcome that, apart from those right at the very top of the income scale, will see the poorest 30 per cent hit the hardest. As my noble friend Lady Hayter reminded us in a fantastic speech from the Front Bench, the rhetoric of parts of Government—I exonerate the noble Lord from this—is increasingly in danger of stigmatising benefit recipients with a benchmarking always made against “hardworking families who pay their taxes”. I am bound to say we heard a little of that from the noble Baroness, Lady Stowell, implying that in order to receive benefits, you must be feckless, workshy and happy to live off the state, no matter that your circumstances may have changed because of a family bereavement, ill health, the worsening of a disability, the closure of a workplace or being forced to move because of housing benefit changes—or, as the right reverend Prelate the Bishop of Leicester said, because of simply making a mistake.
We are in support of a welfare system that recognises the benefits of work, supports people into work or closer to the labour market, and with an obligation on people to engage with the system and sanctions for those who refuse to look for work. These principles underpinned our approach to welfare reform when in government, with advice, of course, from the noble Lord, Lord Freud, in his former life. We know that the vast majority of claimants want to work, but they face job shortages and barriers to employment, so the Government have their part to play in promoting growth and job creation.
Of course, these barriers are not only lack of jobs but lack of skills, and sometimes employer attitudes to employing people with disabilities. A benefits system that provides in- and out-of-work support, and that has a single taper rate, a simple system of disregard and a single payment has the ingredients that could forge a political consensus, as my noble friend Lady Hollis said. However, having these components does not of itself justify the claim by the Secretary of State that there will be no losers and that work will always pay. It depends on the detail. There is a limit to simplicity, because the system must respond to the complexity of the lives of claimants, as we heard from my noble friends Lady Lister and Lady Sherlock; and of course, as my noble friend Lord Whitty said, simplification costs money.
We know that we have a taper rate of 65 per cent rather than 55 per cent, as the noble Lord, Lord German, would wish, because it was imposed by the Treasury; and that nearly 2 million workers will have a worse marginal effective tax rate as a consequence. We know that the savings cap will take thousands out of universal credit altogether, which is why we will seek to remove it during the passage of this Bill. Many noble Lords have commented on the lack of clarity about childcare—what we tragically do not see is a recognition of childcare as an investment to help parents access employment, reduce reliance on benefits and enable career development. We will continue to press for answers in Committee.
We also have no answers on how passporting to other benefits would work, although the passport in from PIP in respect of carers’ allowance is, as I understand it, work in progress. As my noble friend Lady Donaghy said, there is a lack of detail around self-employment, other than the unreal notion that someone starting a business will earn at the minimum wage from day one. We know that the Government have more work to do on payment issues, especially for joint claims, to take account of unequal distributions of finance in some households and to ensure that money allocated for children actually reaches them.
We have the outstanding issue of how direct payments to RSLs in respect of housing support can be made. It is only when these matters, and many others, are resolved that we can make our judgment on the universal credit. Although there are benefits in having a single payment source, it places even greater emphasis on the delivery systems being robust, because it is all or nothing. We have heard concerns expressed by the noble Lords, Lord Kirkwood and Lord Bilimoria; and my noble friend Lord Knight, in a very incisive contribution, effectively made the case for Parliament having reassurance before this finally proceeds.
Separating council tax benefit and housing benefit creates the worst of all worlds: a credit that is not universal, and the need to unpick local authority systems currently coping well with both—many of which, as my noble friend has just said, have been jointly outsourced. Local authorities are having to cope with this at the same time as the challenges of huge cuts in resources, increased homelessness and while picking up the pieces of the discretionary Social Fund—the latter without ring-fenced resources. Can the Minister tell me what assessment has been made of the capacity of local government to respond to these challenges, including that of devising new rebate systems with 10 per cent less money? How will this fragmentation help individuals access specific advice? The calculation of housing costs within the universal credit is delegated to regulations, but we know that this facilitates the uprating of housing allowance by CPI, separating actual rent levels from the housing support available.
The Bill covers just some of the changes to housing benefit that this Government have introduced. Our debate today has illustrated the extent to which noble Lords are appalled by the so-called under-occupancy provisions relating to social housing, ignoring the needs of foster carers, irrespective of where there is available smaller accommodation with equivalent security of tenure, regardless of whether people can afford to move and ignoring the expense to follow from replicating adaptations when disabled people are forced to move. These are illogical, wretched provisions that must be exposed and opposed. Even Mr Pickles has recognised that this will increase homelessness and cost money.
Many noble Lords have also commented on the benefit cap, an arbitrary measure which lacks an evidence base or indeed a clearly stated aim. We must use Committee to clearly challenge the basis for the figures and the perversity of including housing support in the calculation. There can be no more damning critique of this proposal than that of the Children’s Society, which says that 200,000 children would be affected by the proposal, and more than 80,000 children made homeless. I simply cannot believe that the Minister himself will find this acceptable, or the Treasury that it is cost effective.
We have heard from many noble Lords in this debate the fears that the policy in this Bill will have a massive impact on the lives of disabled children and adults, people with long-term conditions and their carers. These concerns have been highlighted by reforms to DLA set in the context of a reduction target of 20 per cent in expenditure mentioned by the noble Lord, Lord Rix. We are not unsupportive of reform to DLA, provided it is undertaken fairly, but what is important—and we have heard this from many noble Lords—is that there is a full opportunity in Committee and otherwise to scrutinise the proposed assessment criteria, the process and the structure of the benefits. As the noble Baroness, Lady Campbell, said, the lack of coproduction in this is to be regretted.
Many noble Lords again expressed particular concerns about the assessment process. The noble Baronesses, Lady Meacher, Lady Campbell and Lady Grey-Thompson, the noble Lord, Lord Wigley, and my noble friends Lord Touhig and Lady Healy raised questions about how the assessment would work in issues relating to people with mental health, fluctuating conditions, autism and Parkinson’s disease. I am bound to say I had a sense of déjà vu in all this. When we were discussing the work capability assessment we had a team of excellent officials from the department and extensive work with stakeholder groups testing the process, but we know what history tells us about what happened to the WCA and the extent to which it has taken time to put it together. We do not want a replication of that. We will also want to know how it works before it has been applied to existing DLA recipients.
The noble Baroness, Lady Hollins, my noble friends Lady Hollis and Lady Morgan and others gave us graphic descriptions of the effect of proposing a one-year time limit on contributory ESA—a limit which is to be imposed retrospectively. As we did in the other place, we will seek to get this extended to two years. We will further seek support for the qualifying period for PIP to be three months, as is currently the case for DLA. It is time for an end to the lingering confusion of DLA mobility for those in residential homes, and to ensure that it is protected.
Under the universal credit, the gateway to extra support for adults with a disability will be through the ESA. What this means is that there is no extra help within universal credit for those found fit for work regardless of their level of disability. The demise of the severe disability premium means less help for disabled people if they live on their own without a carer, and parents of all but the most severely disabled children will have their means-tested extra support cut in half. Moreover, the higher proportion of childcare costs of disabled children in less well-off families will be lost. Whatever the final proposals on childcare, does the Minister accept that these families are currently likely to miss out? We will seek to amend the Bill to ensure that any new disability addition to the universal credit for disabled children is no lower than that they currently receive in the child tax credit system.
Several noble Lords raised the issue of child maintenance: the noble Baroness, Lady Finlay, the noble Lord, Lord Boswell, the noble and learned Lord, Lord Mackay of Clashfern, and my noble friend Lady Sherlock. The legislative basis on which charging could proceed in fact is set down in the Child Maintenance and Other Payments Act 2008, but we will not allow our legislation to be prayed in aid for charging PWCs for routine access to the statutory system on a basis which will inevitably deter parents with care from using a lifeline to maintenance. We will also challenge the veto which non-resident parents have been given over a right to prevent PWCs accessing the statutory system. Of course, we support the encouraging of parents to reach their own arrangements but not for the gateway to act as a barrier to that system. Perhaps the Minister can tell us about the research which underpins the approach that the Government have adopted and the extent of the support services which can be brought to bear.
This is a great upheaval of the benefit system and it is being accompanied by a legal aid Bill which puts welfare benefits and employment out of scope, while limiting housing advice—quite unbelievable. The Bill presents us with many challenges. If it proceeds through your Lordships' House unamended, some of the most vulnerable people in our society will face serious hardship. Their day-to-day existence and their aspirations for the future will be diminished. Our task is to confront the Government with the consequences of what they propose, pursue the detail of the glaring gaps in the universal credit, scrutinise what detail is available on the PIP and the draft regulations and amend the Bill where we can—and to continue to argue the case for a fair, progressive, compassionate and sustainable welfare benefits system.
Autism: Personal Independence Payments
Lord McKenzie of Luton Excerpts(13 years, 2 months ago)
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Lord Freud
Yes, my Lords. I made absolutely clear in that response that I was talking in real terms, so it takes account of inflation.
Lord McKenzie of Luton
My Lords, the Minister said that he is in listening mode with the Welfare Reform Bill and is eager to learn lessons. Can he tell me what lessons he will learn from today’s IFS report, which states that when the tax and benefit programme of this Government is analysed the poorest 30 per cent of people are bearing the brunt?
Lord Freud
My Lords, this is a serious recession, and the IFS emphasised how it will impact. One thing we will discuss as we go through the Welfare Reform Bill is the way in which we direct a lot of resource precisely to the poorest people. On a like-for-like basis, the universal credit injects something over £4 billion extra a year to the poorest people, against the current benefit system.
Pensions Act 2007 (Abolition of Contracting-out for Defined Contribution Pension Schemes) (Consequential Amendments) (No. 2) Regulations 2011
Lord McKenzie of Luton Excerpts(13 years, 5 months ago)
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Lord McKenzie of Luton
My Lords, I do not propose to detain noble Lords for long with my contribution. I start by thanking the Minister for his introduction to and detailed explanation of the orders. As he indicated, they spring from the Pensions Acts 2007 and 2008, of which one has some fond memories and some other memories as well. He reminded us that they were based on the findings of the commission chaired by the noble Lord, Lord Turner. He will understand if we on this side now refer to the commission as the “Drake, Turner and Hills commission”. But he was right to say that there was a political consensus at the time, as indeed there is now. The date for implementation was identified by the previous Government, and we are grateful for the support of this Government in taking it forward. The noble Lord, Lord German, is in a sense right in his description of what is happening here. People are moving out of a DC scheme into something that is effectively a DB scheme—moving out of a funded scheme into something that is pay-as-you-go. That is the essence of the switch that is going on here.
I have about three questions for the Minister, all of which I hope are pretty straightforward. The first was touched on by the noble Lord, Lord German. The impact assessment talks about actuarial neutrality. It identifies for employers both a short-term and a long-term neutral component to this. For individual employees and for the Government, although there may be actuarial neutrality overall, the cash flow effect for each is different in the sense that the Government will generate cash flow from this in the early years, while of course the payback will be the extra state second pension paid in later years. If we look at the remainder of this CSR period and perhaps the next period, how do the cash flows pan out? What is the extra amount of revenue for the Government over the period, which they will pay for later with increased contributions to S2P? What are the Government planning to do with the headroom they will get from that cash flow? I might suggest that they could help out on dealing with adjustments to the state pension age, but that is probably a debate we ought not to have at this point.
My second query was partly prompted and indeed enhanced by what the noble Lord said about the Insolvency Act and Article 3, and why that will not operate in future because schemes post abolition will not be able to track protected rights. I suppose that my question is this: looking at what is happening here, most of the DC schemes involved are personal pensions and therefore do not have the trustee arrangements that some of the occupational schemes may have as part of their fiduciary duties. What will protect the legacy guaranteed minimum pensions of those who built up these rights in the past? As the noble Lord said in his introduction, at the moment protected rights have restrictions on scheme transfers, on the type of annuity that can be bought—a unisex annuity—on survivor benefits and on joint life annuities. I think that that is one of the requirements. If that is all swept away and we are left to deal with contract-based schemes without the protection of trustee arrangements, what protection will there be for people with legacy rights? Obviously for new entrants and for the future the issue does not arise.
My last point again picks up on a comment made by the noble Lord, Lord German. He said that he liked the direction of travel because it helped us towards the enhanced flat-rate pension. Perhaps the noble Lord can give us an update on that. In particular, will he explain how as a practical matter it will be possible to deal with that while there is still contracting out from DB schemes and whether, as the noble Lord asked, there are any proposals to accelerate the withdrawal of contracting out for DB schemes?
Those are the only questions I have, and I look forward to the Minister’s response. However, obviously we support the regulations.
Lord Freud
My Lords, I thank noble Lords for some pointed and excellent questions, which I will be pleased to deal with as best I can. The first, from my noble friend Lord German, on what happens outwith the three-year period, is relatively straightforward. That is rather simple: if there has been an overpayment, HMRC will consider some recovery if it is cost effective; I suspect that it costs rather more than £15, but if it is a reasonable sum it will do it. If there is an underpayment, the additional amount will be paid directly to the individual, obviously subject to de minimis, with the suggestion that they put it in their pension pot, as I said at the beginning. I think that that is more than a suggestion, as well.
My noble friend asked me about the critical issue of communication. When you are in the fourth league of complexity, explaining how you are undoing complexity can be even more complex, taking you down to the fifth league. We are well aware of that. DWP and HMRC are working with industry representatives on a pretty elaborate communication strategy so that the information is targeted at those who need to know. We have developed a number of fact sheets that will be online for members, for schemes, for employers and for trustees. On members, we have made changes in the negative instruments, as part of this package, to require schemes to inform individuals of the key impacts of the abolition.
Both my noble friend and the noble Lord, Lord McKenzie, went on a slight fishing expedition—is that the fairest way to describe it?—about what the implications and interconnections might be with S2P and the state pension, referring to our consultation, A state pension for the 21st century. Again, I have to be slightly boring on that matter because we have now had the responses to it. The closing day was in fact last Friday, 24 June. I think that “We are considering the responses”, is the way that that is expressed. There is clearly a highly interesting and relevant knock-on from this to that, depending on how it comes out.
Both my noble friend Lord German and the noble Lord, Lord McKenzie, asked about actuarial neutrality. The explanatory material makes it clear that there will effectively be an exchange with the uncertainty of the investment markets, where one can clearly get very good returns if one has the right investment strategy and equally appalling returns if one has the wrong strategy. Those risks are exchanged for the certainty of the state pension. I guess that that is what actuarial neutrality means, although it could be described in other ways as well.
Lord McKenzie of Luton
That would be very helpful. I had a look at the impact assessment but could see only aggregate figures rather than year-by-year figures. It would be helpful to have those.
Lord Freud
We can do that. Obviously, there are many figures running around in various ways, but we will get the appropriate figures to the noble Lord in a letter. His connected question on the extent to which there will be increased revenue in the short term and where that might be spent is something on which I could not possibly comment—nor, I suspect, would I be expected to.
I turn to more general issues of insolvency. The noble Lord, Lord McKenzie, talked about some of the more general implications for protected rights. Effectively, they mean that an annuity will have to be purchased with similar provisions to the state scheme. Of course, for that reason very few people will get extraordinary returns and we will get back to neutrality. The removal of the rules on protected rights will increase the flexibility for members. The size of the fund will remain the same but they will have choice in the provision of retirement income.
The provisions contained in the statutory instruments will support the delivery of the abolition of defined contribution contracting out. I hope that I have dealt with all the questions satisfactorily. I commend the measures to the Committee and ask for its approval to implement them.
Disabled People: User-led Organisations
Lord McKenzie of Luton Excerpts(13 years, 5 months ago)
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Lord McKenzie of Luton
My Lords, I thank my noble friend Lady Wheeler for securing this debate today. I did write out a bit of a script, but having just listened to some powerful contributions I think I will discard most of it. My noble friend says that this is her first Question for Short Debate; I feel sure and hope that it will not be the last. I was particularly pleased when she referred to Nasa Begum and the work that she has done, because when we talk about social workers it is all too often when there is a problem and somebody is being challenged. There are many people in that field who do fantastic work, day in day out. They are unsung heroes and it is nice to have an opportunity, even given the circumstances, to be able to join in the praise for somebody who has achieved a great deal.
When I saw that the list of speakers contained the usual suspects, I knew it was going to be a powerful debate. If there is any benefit in not being a Minister, it is that I am not responsible for answering such questions these days. Picking up on a couple of points in the contributions so far, I agree with the noble Lord, Lord Addington, that it is generally not about lack of good will. Government policymakers and local government do not set about their task to get it wrong or to damage and hurt people. It is about understanding. The noble Lord talked about the need to encourage an interface. If he was looking to me for pearls of wisdom on that, I may disappoint him but there is no overall prescription for how you deal with it. You have to work at it hard and recognise the need for that.
The noble Baroness, Lady Campbell, has an effective way of chiding politicians to remind us that we came in at the end of this process and that people had been engaged many years before we even woke up to the issue. I accept that, while the mantra of “nothing without us” carries through from the 1980s until today. The issue about ULOs challenging stigma is particularly pertinent. We all agree that ULOs need to be properly understood, resourced and supported.
There are issues about infrastructure funding and I turn now to the £3 million fund that has been announced recently. The noble Baroness referred to the Localism Bill and the opportunities it presents.
Lord McKenzie of Luton
My Lords, I was going on to localism but, before I do so, perhaps I may recap. I walked out to vote with the noble Lord, Lord Addington, and I think that what he was seeking for me to say earlier was not to report some success I had had with working with colleagues from dyslexia groups but to report the failure; that however much one had tried, it had not succeeded. So perhaps I can clarify that.
Before I get to localism perhaps I should refer to the contribution of the noble Lord, Lord Ramsbotham, which I found fascinating. I went to a seminar at the Centre for Mental Health earlier in the week. The seminar was about getting people into employment, although not necessarily through user-led organisations. It emphasised the key importance of having a mentor who stays with a person and how the one-to-one relationship makes an important difference. One can see the added benefit if that person comes from a user-led organisation as well.
My noble friend Lady Wilkins made the incredibly telling point that if you are not disabled you cannot understand the daily living reality of being disabled. That is why it is so important that we have user-led organisations. She expanded on some of the difficulties of getting funding and winning contracts. I have seen that locally in Luton in relation to a case where, although the process is not yet complete, small organisations have already missed out because they are competing against big organisations which are used, on a national basis, to getting the process right; they know exactly what is required and smaller organisations are therefore missing out.
This actually ties in with issues around localism because if localism is about empowering individuals, local communities and local groups to have a greater say over their lives, the rights in legislation have to be real for people and not just nominal rights. Some are fettered by quite a few powers held at the centre by the Secretary of State, but that is for another debate. People must be supported in being able to take up and make real use of those rights and funding should be attached to doing that.
Briefly, and to reiterate points other noble Lords have made, questions were put about the commitment that the previous Government made. The Improving the Life Chances of Disabled People report said that,
“by 2010 each locality (defined as an area covered by a council with social services responsibilities) should have a user-led organisation modelled on existing CILs [centres for independent living]. This recommendation has been taken forward as part of the cross-government Independent Living Strategy”.
I am right to ask the Minister whether that is still part of this Government’s approach to these matters—is that still a commitment they would wish to take forward? Putting People First talked about the transformation of adult social care and stated that,
“councils should have an enabling framework to ensure that people can exercise choice and control and have access to advocacy, peer support and brokerage systems with strong links to ULOs. Where ULOs do not exist, a strategy to foster, stimulate and develop ULOs locally should be developed”.
Is the noble Lord, Lord Freud, able to say anything further on that matter? Reference has been made to the £3 million-worth of funding that has been made available. I join others in supporting and congratulating the Government on doing that. But that funding is spread over four years and it has to cover things such as a new national head and somebody to be seconded to the Office for Disability Issues from a ULO, and the document talks about ambassadors and experts to provide skills and training support. It also refers to there being a facilitation fund for ULOs. Does all of that have to come out of the £3 million over that four-year period? Specifically, is that fund part of the £3 million? The press release that accompanied the announcement said that the facilitation fund would be,
“available for ULOs to bid for small to moderate amounts of money for specific projects”.
Might the noble Lord, Lord Freud, let us have his interpretation of what “small and moderate” might mean in these circumstances? I conclude on localism by referring to the community right to challenge. There is an opportunity there for ULOs but it must be a real opportunity. They must have the capacity to be able to do that, and perhaps the noble Lord might be able to say something further about that.
Employment and Support Allowance (Work-Related Activity) Regulations 2011
Lord McKenzie of Luton Excerpts(13 years, 6 months ago)
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Lord McKenzie of Luton
My Lords, I thank the Minister for his clear explanation of the regulations, and also for the helpful meeting that he convened last week, the input of officials and the follow-up information. That is a productive way to deal with the issues that emanate from regulations such as these. If there is a downside to that approach, having lots more information just gives scope for further inquiry and questions. I shall try to be brief on that front.
It will come as no surprise that we support the underlying philosophy reflected in these regulations. As the Minister said, they derive from legislation of the previous Government—the 2007 and 2009 Welfare Reform Acts. I believe that we have a consensus on the importance of work and the obligations of government to help those who can work get into work and those who are not yet ready for work to get closer to the labour market. There should be an obligation on individuals to engage with the support available and, with appropriate safeguards, sanctions for those who unreasonably refuse. That consensus also acknowledges that there are some for whom it is not reasonable to expect engagement.
As ever, the devil is in the detail, as the noble Lord, Lord German, said. As we have heard, this is the first time that the Government have activated provisions that can require ESA customers to undertake specific work-related activity. For this to work, clearly it is important that the correct judgments emanate from the work capability assessment. As several noble Lords have recognised already, that has recently been the subject of considerable debate in your Lordships’ House. The appropriateness of the descriptors and the capacity of Atos remain issues. As with other noble Lords, such as the noble Lord, Lord German, and the noble Baroness, Lady Thomas, we await further developments on Professor Harrington’s work.
What is now required from the WCA is not only to advise on whether an individual is capable of work and therefore directed to JSA, or has limited capability for work-related activity and enters the support group, or has limited capability for work, but also, in the latter case, to make some judgment about how long it will be before the individual can be expected to be fit for work. Is this correct? In a sense, this is a new development. It is important because, as we have heard, those expected to be fit for work within six months will be required to access the support provided by the Work Programme rather than be able to volunteer for it or, presumably, potentially be subject to mandated work-related activity by JCP advisers. Is not the emphasis on the timescales adding another dimension to the challenges of the WCA, especially for those with mental health conditions, fluctuating conditions, autism et cetera?
Can the Minister say how the health professional at the WCA stage will be able to make an authoritative assessment of when an individual to be assigned to the work-related activity group will be fit for work in the absence, possibly, of knowledge of the sorts of work-related activity which are available to the individual? Can the Minister confirm—I think that this came from our meeting—that anyone assessed as being on ESA but with a prognosis of being fit for work in, say, six months will have to be reassessed through the WCA before the designation is changed?
Does not the designation of when someone is likely to be fit for work have a significant implication for providers? Someone going on the Work Programme from an ESA flow deemed likely to be fit for work within three months attracts a potential fee which is nearly double that of someone in broadly similar circumstances but who might be deemed fit for work in, say, six months. Is this right? The argument that the Minister advanced is that the difference is that somebody volunteers. But the judgment that seems to be made is that if somebody from an ESA flow is on a work-related activity group and likely to be fit for work within three months, that attracts something like double the fee to the provider of somebody who is broadly in the same circumstances but who will not be fit for work for a longer period, simply on the basis that they have volunteered for the programme. That second category of person could be argued to be a harder to reach person, yet attracts a smaller fee for the provider.
Obviously, someone deemed fit for work would move to the JSA regime and be subject to wider conditionality—for example, jobsearch. But for the purposes of the payment arrangements under the Work Programme, do they keep the status that they had when first referred to the programme? If so, the WCA assessment would have a particular significance for providers.
Incidentally I note that ESA self-employed customers—presumably, previously self employed—will not have access to the Work Programme. Why is this? The details of payment arrangements provided by the Minister under the Work Programme certainly demonstrate strong financial incentives for some groups, but could we be told the projected annual numbers for the first three years for the following ESA groups—on the ESA flow, those likely to be fit for work within three months, and the ex-IB likely to be fit for work within three months?
As the noble Baroness, Lady Thomas, and the noble Lord, Lord German, have said, the Merits Committee raised concerns over the capacity and training, which I share. The Minister touched on that in his presentation of these regulations. It is clearly of very great significance. The existence and application of sanctions has been the subject of considerable debate both during the passage of the legislation and since. We support the necessity of sanction arrangements as a means of ensuring compliance, provided they have due regard to good cause for non-compliance and are sensitive to the circumstances of vulnerable people. We support the Government in concluding that it will be JCP decision-makers who will make decisions about sanctions, not providers. But perhaps the Minister can clarify for us the policy in relation to vulnerable customers and where responsibility lies.
My understanding is that before any sanction could be levied on customers with a mental health condition, a learning disability or a condition affecting communication and cognitive skills, some personal contact should be made, if necessary a home visit. I detect some weakening of this, certainly in the response given by the Minister of State in the other place when these regulations were debated. What is the current policy? Where will responsibility fall between the provider and Jobcentre Plus? What contact will be made by the provider before referral for a sanction and what contact after but before a determination? Is there clarity on this in the contractual arrangements? What monitoring arrangements will be in place? Can the Minister take the opportunity categorically to confirm that there are no targets operated by Jobcentre Plus relating to numbers to be sanctioned, whether for ESA, JSA or any other benefit?
It is noted that the right of lone parents to restrict availability for work-related activity when there are children between the ages of 13 and 16 is to be considered on a case-by-case basis; again, the noble Lord, Lord German, touched upon this point. This consideration is to take account of the individual needs of the child and, among other things, their ability to remain unsupervised. What on earth sort of guidance is to be given to help with this consideration?
We have touched on the Work Programme a little in so far as it is relevant to ESA and work-related activity. I hope that we will have the opportunity for a fuller debate because it is an ambitious project that we want to see succeed. The flexibility of the black box approach and individually tailored support are to be welcomed. Strong financial incentives for helping the hardest hit to get to the labour market is obviously the right approach. Before we have this debate, though, perhaps the Minister can explain why the ex-IB work-related activity group who are unlikely to be fit for work within three months should have treble the potential reward for the providers than ESA customers who are further from the labour market. Will the Minister say a little more about why the Work Programme negates the need for the work-focused health-related assessment?
I look forward to the Minister’s reply on this and other matters, but these regulations are an important step forward and they have our support.
Lord Freud
My Lords, I thank all noble Lords who have taken part for the support for the general principle of what we are trying to do here. This is a component of a very large change, with quite a few moving parts. I note the accusation of the noble Baroness, Lady Thomas, that the only person who has all the moving parts in their head is me. We are slowly getting it out, and this is one element of that process. As I said at the start, those people who are disabled and cannot work will get unconditional support, but we have an obligation to support large numbers of people who could get into the labour market. Many disabled people are in the labour market—not enough, but I think that the figure is around 40 per cent of those who are disabled.
The noble Lord, Lord McKenzie, is very fond of quoting my work, which always makes me blush with embarrassed pride. I also said in the report to which he referred that if the Government do not engage with these people, it is a dereliction of duty. One of the things that we are trying to tackle here is to stop that dereliction and help these people get back to work. I emphasise that what we are talking about is not getting people to work and sanctioning them for not working; this is about work-related activity. We are talking not about the intensive requirements of taking a job but about preparing for that process.
I shall try to deal with the enormous number of questions. I am not sure that I will be able to answer all of them, just because of time and volume. One of the issues that noble Lords have raised is training. The training that we offer will provide much greater emphasis on the need for personalisation and flexibility, which my noble friends Lord German and Lady Thomas were concerned about. There are new demands on staff to do with flexibility. We will provide the products and tools to support the front line in diagnosing customer need precisely. As to decision-maker expertise and who takes these decisions, staff receive extensive training so that they are able to make decisions. They have access to comprehensive, up-to-date, clear procedures and guidance for ESA decision-making, which includes how to handle difficult situations and provide customer care. The delivery of that learning is supported by Atos Healthcare.
Lord McKenzie of Luton
I understand what the noble Lord has said about the category in which you end up. I accept that the evidence base is being built, but to a certain extent it is determined by clear objective factors such as whether you have been on IB or are on ESA, but also by the prognosis that the health professional has made at the WCA, which is much more subjective. A lot could hang on that decision—for example, whether the relevant period is three months or a bit longer. What is our experience of the ability of healthcare professionals to make those fine judgments?
Lord Freud
The noble Lord makes a very interesting and valid point. We have spent a lot of time on this. Health professionals find it very difficult to make accurate prognoses for periods lasting many months. One of the reasons why we have the three and six-month periods is because the prognosis in those cases is much better and much more reliable. Rather than handing everyone in the work-related activity group over to the providers we thought that we would de-risk the situation by having three and six-month periods. We spent a lot of time wrestling with that point as we devised the groups that were going to go into the Work Programme.
I will write to the noble Lord on his question about the flows as I do not have the relevant figures to hand. My noble friend Lady Thomas asked about the closure of some JCP offices. We are planning to offer all affected staff relocation. Many questions were asked but I hope that I have covered all the key ones. If I find that I have not, I will write to noble Lords.
Let me close by saying I am convinced that this is the right way forward. I mirror what my noble friend Lady Thomas said: get this right and there is a huge prize here. I think, genuinely, that we will do this right—and we will watch it. I was asked about assessment and evaluation by the noble Lord, Lord German. We have a pretty elaborate evaluation program running. We will get that evaluation in two waves, the first this autumn and the second in early 2012. We will look at seeing exactly how this customer experience works in some detail, so we will get some flavour of that pretty soon. I have no doubt that we will be debating it at that stage, which will be quite interesting. I commend these regulations to the House.
Social Security (Electronic Communications) Order 2011
Lord McKenzie of Luton Excerpts(13 years, 6 months ago)
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Lord Elton
In his reply, will my noble friend include a word about whether the arrangements for blind or severely visually handicapped people will change as a result of this system and, if so, how they will be catered for?
Lord McKenzie of Luton
My Lords, I thank the Minister for his explanation of the order and for not straying into too much technical jargon so that some of us, at least, were able to keep up.
We support the improvement in customer service delivery through self-service online channels. It is an approach which can be more convenient for customers and more efficient for the DWP. It is, indeed, a win-win situation.
As the equality impact assessment indicates—supported by research by the Joseph Rowntree Foundation—digital services can, in particular, assist disabled people to complete transactions and arrangements personally, thereby reducing reliance on others.
As the Explanatory Note makes clear, the order is enabling rather than mandatory. It asserts that those who do not wish or have the means to take on the new arrangements can continue to use the existing postal, face-to-face and telephony channels. However, it goes on to say that existing claimants will be “invited” to switch to the new service. New claimants will be able to access it via the Directgov website and will be encouraged to do so. As we have heard, the aim is for 80 per cent of all JSA claimant transactions to be done online by 2013. The obvious question to the Minister is: what practical safeguards will be available to prevent customers being encouraged to use the new arrangements when they are unfamiliar with the technology? This could clearly act as a deterrent to individuals claiming or sustaining a claim.
The equality impact assessment explains that all jobcentres will have a “digital champion”, whose role will be to act as ambassador for online services to improve customer confidence and the take-up of digital services. Particularly given the news reporting of job cuts at JCPs, can the Minister say how many jobcentres have a champion in place and what the plan is to complete this commitment? Can he also say something about special customer records and the capacity of the system to provide for appropriate levels of security for these particularly sensitive cases? How are these being catered for within the system?
There is—and has rightly been—strong emphasis on training for Jobcentre Plus staff, especially to be sensitive to customers who may have mental health conditions, fluctuating conditions or communication difficulties, which might be identified at various stages of the customer journey. Is the Minister satisfied that these opportunities are not diminished by the use of online services? Will system failures automatically be factored into compliance failure decisions to prevent people being chased—or potentially sanctioned—simply because the system has gone down?
With those few brief questions, we are happy to support this order.
Child Poverty
Lord McKenzie of Luton Excerpts(13 years, 6 months ago)
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Lord Freud
Yes, my Lords. One of the peculiar things about what happened under the previous Government was that the Gini coefficient went up to an all-time record. It has moved slightly in the past year but not in any meaningful way. It is important that we address that as part of the context of looking at our poverty approaches but, as noble Lords opposite will know, this is not an easy thing to do.
Lord McKenzie of Luton
My Lords, the Minister referred to the importance of getting people back into work and I agree with that. Will he cast his mind back three or four years to a document that he wrote when the previous Government were in office? He wrote:
“The Government”—
that is a Labour Government—
“has made strong, and in some respects remarkable, progress over the last ten years … The New Deals have been enormously successful—helping over 1.7 million people into work since 1998. The creation of Jobcentre Plus in 2002 extended the rights and responsibilities regime for people on all benefits … and is widely seen as having been a model for effective public service delivery”.
Does the Minister still hold to that view?
Lord Freud
I used the expression “in some respects” and I stand by that. In some respects there was a great deal of success. Under the previous Government we discovered that active labour market policies worked, and when they were introduced—they were actually introduced by the previous Government—and pushed in they had a one-off effect. However, we are left with a huge problem of people on inactive benefits which the previous Government did nothing to solve. We are now trying to do that.