Jobseeker’s Allowance (Sanctions) (Amendment) Regulations 2012

Lord McKenzie of Luton Excerpts

Monday 8th October 2012 Grand Committee

[Baroness Stowell of Beeston]

My Lords, this instrument was laid in draft before the House on 9 July this year. It is regarded as being compatible with the European Convention on Human Rights. This instrument provides for a more effective, more proportionate and clearer sanctions system, but it also preserves the important safeguards that are required to ensure a fair and balanced system.

I think that there is a general agreement that it is right to expect claimants who are able to look for or to prepare for work to do so. We provide people with financial support when they are out of work. In return for that financial support, we expect them to do everything they reasonably can to get back into work. We know that active job search and engagement with advisers increases the chances that people find work more quickly than they would otherwise.

Most people who find themselves out of work and in receipt of jobseeker’s allowance are doing everything they can to get back into work and are complying with the conditions associated with this benefit. But not everyone is, and for those people, a more effective sanctions regime is needed. A sanctions regime should be clear and proportionate, and should fully encourage claimants to meet the requirements that will support them back to work.

The current sanctions regime is not achieving those objectives as well as it might. Let me offer a little more detail on the limitations of the current regime and how these new regulations will address those. First, some of the existing sanctions are simply not tough enough, and there is little to deter claimants from repeatedly failing to apply for a job or look for work. For example, if someone fails to meet one of the most important requirements, such as refusing a suitable job offer without good reason, they may be sanctioned for as little as one week. These regulations introduce escalating sanctions periods so that in relation to these most serious failures, the sanction periods will be 13 weeks for the first failure, 26 weeks for a second failure within a year of the previous one, and 156 weeks, or three years, for a third or further failure within a year of a previous failure which resulted in a 26 or 156-week sanction. So sanctions will be tougher for those who repeatedly fail to meet their requirements and repeatedly fail to change their behaviour.

Three-year sanctions will apply only in the most extreme cases where claimants have serially and deliberately breached their most important requirements. For these claimants, previous sanctions of 13 weeks and 26 weeks have unfortunately not provided sufficient deterrent to change their behaviour. We anticipate that very few claimants will be subject to this length of sanction, but we believe that such a sanction is necessary to act as a deterrent and to ensure compliance with the requirements that are critical to helping claimants move back into work.

We cannot expect sanctions to act as a deterrent unless the sanctions themselves are clear. Currently they are not. A sanction for failing to apply for a job could be anything between one and 26 weeks. Under the new regime, claimants will be able to understand upfront exactly how their benefit will be affected. They will know that the first time they refuse a job offer without a good reason they will get a 13-week sanction.

There is also a lack of clarity in relation to sanctions for failure to comply with the requirement designed to improve a claimant’s chances of finding or preparing for work. Currently there is a complex range of sanctions for these types of failure, including one or two-week sanctions for failing to attend an interview at a jobcentre, two and four-week sanctions for other failures such as failing to carry out a direction from an adviser and 26-week sanctions for some claimants in the work programme. Under these regulations, the sanction for not meeting such requirements will be set at a clear and simple period of four weeks for a first failure and 13 weeks for a second or subsequent failure within a year of the previous failure.

Another feature of the current system is that in some circumstances there are only limited consequences for failing to be available for work or failing to actively seek work. Not meeting these basic conditions of entitlement generally leads to disentitlement from jobseeker’s allowance. But currently those who are disentitled for these reasons can reclaim straightaway and in some cases lose only one or two days’ benefit. It is not right that claimants can fail to meet the fundamental requirements of claiming benefit and yet face little consequence. Therefore, those who reapply for benefit following disentitlement for these reasons will be subject to the new sanction of up to four weeks for a first disentitlement and up to 13 weeks for a second or subsequent disentitlement within a year of the latest one.

We want to introduce into the sanction regime some recognition for claimants who do the right thing. Therefore, as a new incentive for claimants to return to sustained work, if they work for six months before they become re-entitled to jobseeker’s allowance, the balance of any outstanding sanction is lifted. Under this regime, some things will not change and important safeguards will remain in place. We will continue to tailor requirements to suit claimant circumstances, for example to allow for caring responsibilities and to take account of mental or physical health conditions. Claimants will have the opportunity to explain why they have not complied with a requirement. Just as now, if they provide a good reason a sanction will not be imposed.

Claimants will still be able to request further information about the sanction decision, request a reconsideration and appeal against the decision. If claimants have concerns about whether the correspondence address they have given us is secure, we will arrange for letters and notifications to go to an alternative address or to be picked up from the jobcentre.

These regulations will broadly align the jobseeker’s allowance sanctions regime with that for universal credit. As well as providing the clarity and proportionate consequences described earlier, this change will ease the transition to universal credit for both claimants and Jobcentre Plus staff.

In conclusion, these changes are intended to better drive the behaviour that maximises a claimant’s chances of finding suitable work. I commend them to the Committee.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for introducing these regulations. I welcome the noble Baroness, Lady Stowell of Beeston, to her first appearance at the Dispatch Box on DWP matters. We hope that there will be many more such appearances and that this is not just an operational response to the absence of the noble Lord, Lord Freud, who drew the short straw and had to go to the party conference.

We cannot support these regulations. That should be clear to the Minister from the debate in the other place. That is not to say that we oppose every aspect of them, nor do we oppose the principle of sanctions. Properly constructed and fairly applied, they have an important place in the benefits system. They encourage compliance with claimant obligations. We also support regulation for a clearer relationship between the length of a sanction and how that relates to the failure to comply with the particular obligations.

What concerns us in particular, however, is the three-year sanction, which we consider to be excessive and, indeed, counterproductive. As was spelt out in the other place, the concern over the three-year sanction is not only that it will inevitably create hardship but that it will create an extended period where there is a weak connection with the labour market. Will the Minister clarify what ongoing obligations an individual has during the period of the sanction and what entitlements the individual has during that period; for example, their access to the Work Programme? Would failure to meet any obligations during a period of sanctions itself be further sanctionable?

In considering these regulations and the JSA regulations, we need to be mindful of what is happening at the moment with all the reassessments, the flawed application of the WCA and the fact that many people were being pushed on to that benefit from ESA and IB. I would be grateful if the Minister would also clarify the circumstances where someone subject to a sanction gets a job and ceases to be eligible for JSA. What precisely is the position on their reclaiming? Paragraph 7.7 of the Explanatory Memorandum suggests that there is a disentitlement of four or 13 weeks where the original disentitlement was related to,

“not being available or actively seeking work”.

However, does this replace any unexpired portion of the original sanction or is it additional to it? What is the position of somebody who is subject to a 26-week sanction for refusing work but who gets a job for two weeks after, say, one month and then reverts to JSA? They would have been without JSA for six weeks. Do they have a further seven weeks of sanctions to go?

I have some more specific questions. Can we have an update relating to the numbers of sanctions and disentitlements? When we debated this during the Welfare Reform Bill it was noted that there was an alarming increase in 2010-11 in comparison with the previous year and a 42% increase between July and September 2010 in comparison with the comparable preceding period. Can we be given the numbers for the subsequent year, please? We have previously been assured that there is no question of the DWP having formal or informal targets for sanctions and that the previous overzealous misinterpretation of instructions has now been corrected. Will the Minister confirm that this is the case? Can we be told what management statistics will be collected on a routine basis and the use to which they will be put? While not being a target, what provision is made as regards the budgets for reductions in benefit arising from the application of sanctions for the current year, and what is the split between pre and post-October 2012 data?

Under the current arrangements, the days of a sanction period count towards any 182-day entitlement to contribution-based JSA. Will that change? Under the existing regime, we have the saving of just cause relating to leaving a job voluntarily and good cause for neglecting to avail oneself of a job opportunity. These terms have been developed in regulations and, it is understood, from time to time in commissioners’ decisions. The Explanatory Memorandum sets out that these concepts are to be subsumed into a new good reason concept, the interpretation of which is left to decision-makers. Does this mean that all existing precedents and guidance are to be disregarded? For example, a person is currently treated as having good cause if they do not accept a job that is vacant because of a trade dispute: that is, they are not required to be a strike breaker. Will this protection still operate under the new sanctions? Currently, if there is no automatic good cause, the decision-maker must nevertheless take certain circumstances into account. These include where a particular job or carrying out of a jobseeker’s direction would be likely to cause excessive physical or mental stress. What will happen to this requirement under the new regime and, similarly, the requirement for decision-makers to take religious and conscientious objections into account? Is there to be any guidance on this issue in the new world of sanctions? How will the consistency of approach to these matters be assured and, indeed, monitored within the department? The proposed penalty regime escalates—13 weeks; 26 weeks; three years—and the escalation is determined by the number of prior failures. At its point of introduction, what account is taken of any sanctionable failures prior to that date? Is the slate wiped clean at that point?

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[Baroness Stowell of Beeston]

That is the case. That is what I have explained. If you are sanctioned, you are not in receipt of jobseeker’s allowance. There may be other benefits that you are entitled to, such as housing benefit. I think it is the use of the word “entitled” that is confusing matters, and I must apologise if I am confusing the Committee.

If somebody receives a sanction which leads to them not receiving their jobseeker’s allowance, that does not mean that they are not entitled to jobseeker’s allowance; it just means that they are not in receipt of it because they have not done something that is required of them in order to be entitled to receive that allowance. To be disentitled means that you have to stop being—I forget what the precise language is—available and able to carry out work. I think I have used imprecise language, and I apologise.

The noble Lord, Lord McKenzie of Luton—

[Lord McKenzie of Luton]

I shall pick up the point the noble Baroness has made. I apologise for interrupting. If somebody has been sanctioned for three years and the local job market is such that the prospects of getting employment for six months look pretty grim yet nevertheless they are still, at least in theory, subject to JSA conditionality, what will encourage them to undertake those obligations? It seems to me that if you have a three-year period when this persists, people will drift from that support. There is nothing that encourages them to engage. If they do not engage, does that mean that they could be further sanctioned during that period?

[Baroness Stowell of Beeston]

I think this is a point that the noble Lord raised earlier, and I was coming to it. I repeat that I think the number of people who will be sanctioned for a three-year period will be very small. However, during any sanction period somebody who is in receipt of a sanction will still be required to go into the jobcentre and receive support from the staff to help them get back into work. That aspect of the support that is available to somebody out of work would not be removed.

The noble Lord, Lord McKenzie of Luton, asked what measures we are putting in place to monitor the new sanctions to see whether they have the intended effect. There is a process in place. The department will consider undertaking further analysis once the findings suggest further lines of inquiry. There is a process that will monitor the process.

I think it was the noble Lord, Lord Kirkwood, who asked about pilots, which may have been in the same ballpark. On that matter, these regulations make changes to the JSA regime for a temporary period. It is the universal credit regime that will be tested in pilot, not these interim changes.

The noble Lord, Lord McKenzie, asked whether a sanction would still apply if someone who is sanctioned finds work, so the claim ends, and then reclaims. I am sure that he will clarify this for me if I have misunderstood, but he perhaps meant to go back to my misuse of language around sanction and disentitlement or entitlement. A 13-week sanction would apply only to a new claim after a disentitlement for failure to meet the jobseeking conditions. If someone had a sanction and then found work so that their claim ends, on a reclaim the unexpired portion of the previous sanction would apply, as now.

There were quite a few questions from various noble Lords about the process of decision-making and definitions of “good reason”. The noble Lord, Lord German, asked about this and why examples of good reason have been removed from regulations. Under the revised regime, we want the decision-maker to take into consideration all the facts and evidence presented by the claimant. We think that the regulations were perhaps a little too prescriptive. We would much rather that the decision-maker were in a better place to make that change.

The noble Lord, Lord McKenzie, asked why we are replacing “good cause” with “good reason”. This is just a simplification of language; it makes no substantial change. As now, if claimants can show good reason for failing to meet requirements, they will not receive a sanction. The noble Lord asked how well the “good reason” provision will work in practice. Notwithstanding what I said about regulations, examples of possible factors that might count as “good reason” include a sincere religious or conscientious objection, caring responsibilities, emergency duties, and so on, but this is not an exhaustive list.

The noble Lord, Lord McKenzie, certainly asked some specific questions about protections and whether trade disputes or a religion would still exist in referring decisions about whether somebody should apply for a job vacancy. Advisers can continue to agree restrictions on the type of job that a person is willing to take. These relate to the type of employment for which that person is available, the terms of employment and the locality. That would include those with religious or conscientious convictions, who may not wish to undertake certain types of work. For example, they may not be willing to work with animal products or for a company associated with live animal exports. No claimant will be expected to take a job that was vacant as a result of a trade dispute.

[Lord McKenzie of Luton]

I thank the Minister for a lot of the detail that she is providing to us this afternoon. Can she just clarify the position? At the moment we have “just cause” and “good cause”, which have been reflected in some particular regulations and certainly in some guidance. I think that there are some commissioners’ decisions which flesh out the meaning of those terms. Are all of those precedents going to be swept away and not applied, or are they going to stay in being and be used to support the concept of “good reason”?

[Baroness Stowell of Beeston]

Yes, they still apply.

The noble Lord, Lord McKenzie, also asked about people with health conditions. These regulations do not change the requirements that are on claimants as of now. Through Jobcentre Plus and the work programme, we will provide claimants with health conditions with the personalised support that they need to overcome their barriers to employment. All requirements will take their health into account to ensure that they are not asked to do something which would be unreasonable.

The noble Baroness, Lady Turner of Camden, asked in her remarks about those disabled people who may be moving from DLA to JSA or a version of that under universal credit. Today, we are obviously concentrating on JSA, which is very different to DLA. However, I take on board the point that she makes about ensuring that people have a clear understanding of what is changing and how they are affected by those changes. That is certainly something which needs to be addressed.

Public Bodies (Child Maintenance and Enforcement Commission: Abolition and Transfer of Functions) Order 2012

Lord McKenzie of Luton Excerpts

Thursday 12th July 2012 Grand Committee

The abolition and transfer of CMEC is designed to increase effectiveness and achieve economies over the longer term. Most significantly, those managing the delivery of the service will no longer be at arm’s length from Ministers, who will be accountable and answerable to Parliament for performance in this area and for the ongoing reform of the child maintenance system. This will enable Ministers to manage the major reforms to that system and to work towards the goal of helping more parents to make the right choices in the best interests of their children by taking responsibility for their financial, emotional and social needs and remaining involved in their children’s lives even when relationships have broken down. I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of the order, which is to abolish CMEC and transfer its functions back to the DWP, where it will operate as a business unit within the department. As we have heard, CMEC has not been around for long; it was created by the 2008 Act but was an integral part of the reform of the CSA that broadly followed the recommendations of the Henshaw report. This was essentially the third attempt to make it fit for purpose after its flawed creation in 1991.

That third attempt—we have heard some of this from the Minister—included a simplified assessment system, based on gross income, to be provided directly by HMRC; an overriding objective to maximise the number of effective maintenance arrangements; the removal of the compulsion on benefit claimants to use the statutory system; the obligation to promote awareness of the importance of maintenance arrangements; the obligation to provide information and guidance to parents by the Child Maintenance Options service; new IT systems eventually facilitating the provision of just one statutory calculation system; and a range of strengthened enforcement powers. All this was placed under the control of CMEC, an NDPB and, unusually, a Crown one at that—there are only a couple in existence.

We acknowledge that the transfer of the CSA was not a popular decision among staff who were concerned about losing their Civil Service status, although terms and conditions were protected. Truth be told, it was not the only possible structure within which the CSA revamp could have taken place. At the time, though, it was seen as having the merit of being part of giving the CSA a fresh start and of having not only a dedicated operational management but dedicated board oversight to see that the range of objectives were progressed. This was seen as important for the efficiency of the fundamental assessment, collection and payment arrangements but also for the wider obligations of the promotion of child maintenance and the provision of information.

It is understood that the Government contend that each of the objectives of the revamp endure and that reverting to be a part of DWP will not change this; the Minister has pretty much confirmed that. It is contended that the abolition of CMEC will allow for greater ministerial accountability for child maintenance. Frankly, that is at best a marginal argument. It suggests that there are not clear lines of accountability between NDPBs and Ministers. These are generally through regular reporting but technically through the department’s framework agreement and, of course, through budget-setting. These provided a natural separation between operational matters and policy, and the oversight of the board was important in ensuring a balance of effort and resource going to the collection process and the support service.

The Minister will be aware that, as in the other place, we seek assurance that the removal of the explicit objective to maximise the number of effective maintenance arrangements does not mean that it will not remain the key objective. Can we understand what data will be routinely available to monitor whether this is so? There is a risk that this will get subsumed into broader issues around family policy with which we might entirely agree but where there is a loss of focus on this aspect.

Incidentally, I note that the order is to take effect soon. Would it not have been better to have any transfer at the end of a financial year? Will the Minister confirm that there are no adverse tax consequences of the transfer of property, rights and liabilities from CMEC to the DWP? Can we please have an update on the move towards a single statutory system of child maintenance? What is the latest timetable?

Specifically on the enforcement powers, can it be confirmed that the powers set out in the 2008 Act can be implemented equally as effectively by DWP as by CMEC? What is the timetable for bringing them all into effect?

We are not sure this move is necessary or the right one at this time but will not oppose it, although we will seek to keep up to date with progress under the new arrangements.

[Lord German]

My Lords, I come to this discussion with some background knowledge of bodies being taken “in house” under the previous and present Labour Administrations in Wales. Accountability is crucial. The question we should ask is whether a body has the right purpose. In this case, the purpose is correct, in that CMEC provides a determined service and does not require the same flexibility of operation or fleetness of foot as, for example, an economic development body might need in attracting new investment into one’s country. However, the question of accountability remains. Any change of this sort works only if it provides a better outcome for customers at the other end and in terms of the services being provided. Does my noble friend the Minister agree that having a phone number for complaints, when last year there were 23,000 complaints, would not be a helpful way for the Government to proceed? Asking in a year or two whether there had been a certain level of complaint about the service and whether it had improved as a result would be the way to judge whether this is the correct move.

Additional funding for voluntary agencies and third-sector organisations to support this work was announced during the passage of the Welfare Reform Act. How does my noble friend see that dovetailing with the in-house operation? Will it deal with the level of change being anticipated? What relationship is there to be between those third-sector organisations and the department?

One of the criteria that always worry customers is, “Is there somebody who I can call or who I can contact who is dealing with my case?”. Will there be someone in the in-house regime who holds the file for a particular customer so that the customer can know who they will be talking to if they wish to make contact?

It would be to the advantage of the in-house service if other parts of the DWP were to provide supportive services. We know that people call CMEC at present with a variety of problems. They are not purely financial but relate to other sorts of service and support. Some of them are to do with local authorities; some are to do with caring responsibilities; and some are to do with work and so on. Can my noble friend indicate what range of on-call services the department will be able to provide to the new in-house operation? For example, data held under the universal credit system might be made available to people working in the new part of the department, thereby making things quicker.

At family breakup, a complex web of issues faces parents. What will be the scope of advice and signposting in the new regime? Will a sympathetic ear be available? Will there be someone who can provide a range of signposts to different services or make the connections if some of them are within the department?

I return to the issue on which I started: accountability. There will now be accountability to Ministers, but that accountability will be tested by Parliament. Does my noble friend intend to produce an annual report or regular update on performance in this area of work, so that noble Lords might be able to test whether the regime has worked effectively? Clearly, this service has not worked effectively over the years since its creation. It has caused a great deal of heartache for a large number of people. The ambition is to improve but we need to be able to test that improvement, and I wonder in what ways that will happen, apart from the normal scrutiny of the Minister through questioning. Perhaps the Minister could lay before Parliament some of the issues that have been successfully achieved or otherwise in data form so that we can make that judgment.

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[Lord Freud]

Actually, I would like to turn that around on the noble Baroness; I will accept a letter from her on the lessons from history, and I will pass it on and make sure that they are applied. I look forward to receiving that.

On my noble friend Lord Kirkwood’s question about how we will achieve the savings, we are talking about securing ministerial accountability—this is not about driving savings. The amount of savings from this measure is pretty modest: direct savings are probably running at about £500,000 a year, and that is due to changes to IT systems and one-off costs. We would hope to see longer-term savings from integrating services more deeply into the department. I think, and this point was raised by my noble friend Lord German, that there are some real opportunities here to get holistic support. The longer that I have been in this job, the more I have realised that bringing support together for people and families in trouble is the way to go. There is an opportunity for us to pull the services together in this context as well as in other contexts.

I am tempted to offer to write to the noble Lord, Lord McKenzie. I always feel that it is a triumph if I can get out without offering him a letter because I can answer all his very clever questions. I think that I am down to the one on adverse tax consequences. Although it is always difficult to prove a negative, I cannot imagine how there can be adverse tax consequences because we do something in the middle of the year, when they are both effectively Crown bodies. If that is a wrong tentative statement, I will commit to write, but I hope that I will have avoided any need to put pen to paper for him on this occasion; that would be one of my personal targets. This is about making sure that Ministers are fully accountable to Parliament.

[Lord McKenzie of Luton]

So that the Minister does not have to commit anything to paper, will he deal with the question about the enforcement powers? There is a whole raft of them in the 2008 Act. Those are all presumably going to be taken over by DWP. Where is the department on bringing those into effect?

[Lord Freud]

My Lords, the noble Lord is right: we just transfer those powers over. There is no change in them. As to the detailed timetabling of all that, we are preparing to show that to noble Lords. The easiest way is if I come to that, unless I have a miraculous answer—which I do not think that I have to this specific question. I will deal with that when we assemble, quite soon, on that issue. I will not write.

I close by reassuring noble Lords that ensuring that children get the support that they require, both financial and otherwise, when their parents cannot live together and ensuring that they have the best opportunity to thrive during their childhood is what this is about.

Social Security (Civil Penalties) Regulations 2012

Lord McKenzie of Luton Excerpts

Thursday 12th July 2012 Grand Committee

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

My Lords, I can confirm that, in my view, the statutory instrument is compatible with the European Convention on Human Rights.

These regulations support the powers introduced by Section 116 of the Welfare Reform Act 2012, which allow both the Secretary of State and local authorities to impose civil penalties in relation to benefit claims and awards in certain circumstances. That section allows for the amount of the penalty to be set by regulations. Our reason for bringing forward these regulations is straightforward. It is right that claimants should take responsibility for the information which they provide in order to receive benefit, or to notify us of important information affecting their entitlement. Claimants are in the best position to tell us of these facts and of these changes as soon as they occur. When you consider that £1.3 billion is lost each year as a result of claimants who fail to do this, it is clear that we have an immediate issue to address.

Introducing a civil penalty will help to make claimants more personally responsible for the overpayments they incur and encourage a positive change in future behaviour. We remain committed to tackling the intolerable financial loss through claimant error and the regulations before the Committee support that aim, the detail of which I will now explain.

In bringing forward these supporting regulations, we have set the civil penalty at £50 in all three cases where a penalty may be imposed. The amount of £50 was previously announced in government publications and was stated by me and my honourable friend in another place during the passage of the 2012 Act. I trust, therefore, that the penalty level is no great surprise today. In setting the penalty at £50, we aim to be tough but fair in our approach. It is also a significantly lower amount than the harsher consequences which would apply to those who commit benefit fraud offences. The penalty is directed at a failure to take proper care of a benefit claim, as distinct from fraud. We believe that £50 is an appropriate amount for the penalty level. It is high enough to encourage claimants to take more personal responsibility for overpayments incurred through their negligence as well as encouraging a positive behaviour change in any future dealings with the department. The penalty will be simple to calculate and easy for the claimant to understand and recognise. Providing for the same penalty to be imposed in all three cases where they can be imposed will allow for this.

I reassure noble Lords that we will always consider the individual circumstances of the case when deciding whether to impose a civil penalty. To be clear, we must tackle claimant errors which results in losing as much as £1.3 billion each year. This penalty will help us to achieve that. Those who continue not to take proper care of their claim in future will also risk incurring a £50 civil penalty on top of having to pay back the overpaid money. I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his explanation of these regulations. They have of course already been considered in another place. We do not object in principle to what is proposed, given that some £1.3 billion is lost through claimant error each year. I do not know if the Minister has an update on estimates of benefit overpaid through official error; if he does, it would be of interest to hear what that number is.

As we have heard, the civil penalty is set at £50 for each of three types of error, namely incorrect statements, failure to provide information and failure to notify changes of circumstances. So far as incorrect statements are concerned, they must have been made negligently and reasonable steps not taken to correct the error. In the case of disclosure of information and failure to provide details of changes of circumstances, there is the defence of “reasonable excuse”. It is therefore acknowledged that application of the civil penalty should always require a judgment to be made; the Minister confirmed that.

Can the Minister confirm first that, except in the case of housing benefit and council tax benefit, the judgment will always be made by Jobcentre Plus decision makers and not by contractors? The Minister of State in the other place confirmed that guidance would be available to staff, but we would be grateful if the noble Lord, Lord Freud, could say a little more about that guidance. We have discussed many times the situations of those with mental health conditions, especially those with fluctuating conditions, in connection with the issue of sanctions. The same issues must surely run for the issue of penalties. Can the Minister say specifically what the guidance is likely to cover in this respect?

The Explanatory Note says that DWP will,

“draw on the expertise of interested outside stakeholders to ensure that guidance, communication products and decision making processes are suitably tailored to meet the needs of the range of claimants”.

Might we be told what this has amounted to, to date?

In passing, we had a very helpful presentation on progress on universal credit earlier today. I did not spot anything flagged as part of the claimant process issues around the prospect of civil penalties in the various bits of information we had, but perhaps we missed it in that presentation.

The Explanatory Memorandum states at paragraph 7.7 that where a failure to disclose could cause an overpayment of more than one benefit,

“only one civil penalty will apply”.

What is the situation where the failure relates to an assessment of, say, jobseeker’s allowance and housing benefit? Prior to universal credit being introduced, the appropriate authority for the latter will be the local authority, not the DWP. How will it be ensured that only one civil penalty will arise?

We debated this during the passage of the Welfare Reform Act, but will the amounts collected in penalties accrue to the Treasury, to the DWP or to local authorities? If the latter, how will a single civil penalty be divvied up?

There was discussion in the other place during the passage of the Welfare Reform Act about the anticipated volume of civil penalties—in excess of 500,000—especially in contrast to HMRC data concerning parallel provisions. If this is right, it is a worryingly high volume and calls into question the real level of discretion that will be available in judging whether someone has been negligent or has failed to take reasonable steps to correct an error. What assessment has the department made of the time and cost involved in making these judgments? There must surely be an impact also on the volume of appeals. What does the Minister think this might be?

The provisions apply to the administration of council tax benefit also. As I indicated earlier, we are doing our best for the Minister to have its replacement inculcated within the universal credit through our deliberations on the government Finance Bill but, I am bound to say, some of our arguments are, unusually, falling on stony ground. Should council tax support be localised, the provisions of this order would presumably cease to have effect for local schemes, even the default ones. Presumably one would have to look to the powers in that Bill to see what alternatives might be available.

Because the universal credit is intended to be the great simplification, one would hope that that would make claims and associated issues easier to deal with and would therefore ease the circumstances in which these penalties might be applicable. However, that remains to be seen. We will not oppose these regulations.

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[Lord Freud]

My Lords, I shall try to deal with as many questions and to avoid writing as many letters as possible. The noble Lord, Lord McKenzie, asked about the latest figure on official error. The latest figure is £0.8 billion. As regards making sure that one civil penalty will apply, we have put in place processes for decision-makers to check whether a penalty has already been applied for the same failure or error resulting in the overpayment. Only the JCP and the decision-makers, PDCS, are dealing with the non-housing matters. The way in which we ensure that we do not get a double whammy with local authorities and DWP is for local authorities to apply their penalties only when the standard housing benefit or council tax benefit is the only benefit in payment. In that way, there is no possibility of an overlap.

We are drafting the guidance and we hope to share the final draft guidance with SSAC by the end of this month. We will look to share it with other relevant stakeholders at that time to take on board their comments. The guidance will cover the obvious examples of negligence, reasonable steps and reasonable excuses. As one would expect, there will be intensive training, which will explore definitions of the penalty criteria. I do not think that the figures have changed from the impact assessment that we discussed when we were looking at the Bill. The cost is £19 million over 2014-15. The appeals estimate, which we discussed, remains purely an estimate.

In response to my noble friend Lord German’s question on the difficult mix of discretion and consistency, it is important that we have clear guidance about what constitutes the penalty criteria. Each case will be individually considered by a decision-maker. They will have general duties, such as to look at only what is relevant and to explain their decisions to claimants. My noble friend’s idea had not occurred to me. He is more devious than me about using this process to make sure that we do not have different information going to decision-makers and later to tribunals. I think that I shall take that away and think about it, as it is rather clever. That is a design issue that we shall explore.

I say in answer to the noble Lord, Lord McKenzie, that we will monitor the new penalty to ensure that it is effective—and to what extent—and that there is equality of treatment. We will use evidence from a range of sources such as administrative data and wider data sets. In practice, one of the main success criteria will be that we impose fewer penalties as time goes by.

We talked in the past about the fact that we now have a framework for conducting trials much more coherently right through the system. Clearly, we will pick out the key behavioural impacts of different aspects of the policy. How sanctions will work in that area is something that we will look at with randomised control trials. It is a very obvious test and there will be mechanisms for conducting it. We will look at the results very closely, and rather earlier than at the results of other tests, once UC has come in. I hope that I have dealt with all the issues.

[Lord McKenzie of Luton]

Perhaps the Minister would just confirm whether the penalty revenue accrues to the department or to the Treasury.

[Lord Freud]

My Lords, I distinctly remember writing a letter to the noble Lord on this matter—and I really regret that I cannot remember what I said. So I will let my letter on the matter stand. Perhaps the noble Lord would look through his files. I have just received a note to say that penalty revenue will go into the Consolidated Fund. I remember writing that now; I laid it out in detail. If the noble Lord would like amplification on that letter, which was quite long, I would be happy to give it to him, perhaps over a cup of tea.

[Lord McKenzie of Luton]

I am grateful to the noble Lord. That means that the costs associated with the system will fall on the department and the revenue will go to the Treasury.

[Lord Freud]

Yes, but in reality there will be a transfer one way and then a transfer the other way within the overall DEL settlement. There may be some minor timing discontinuities, but my officials in the DWP are extraordinarily well versed in discussing these matters with equally well versed Treasury officials and getting the flows of funds to work together—so not even tea on that issue.

As ever, noble Lords asked very informed questions. I hope that I have dealt with all of them and welcome the fact that there is general support in principle for the regulations. I commend them to the Committee.

Child Poverty

Lord McKenzie of Luton Excerpts

Tuesday 26th June 2012 Lords Chamber

[Lord Freud]

My Lords, I will pass that view on to the Department of Education.

[Lord McKenzie of Luton]

My Lords, as we have heard from the Minister, universal credit was supposed to be the last word in welfare reform and the route to tackling worklessness and child poverty. It is clear from recent information that it seems to be behind schedule and heading for being overbudget. Is that the reason for the Prime Minister’s latest foray into welfare reform? There are 17 ideas, which are apparently his and some of which he said could be implemented before the next election if he gained the support of his Liberal Democrat coalition partners. On which of the 17 ideas in particular is he trying to get the agreement of his coalition partners? Do they include removing access to housing benefit and the change in the link with inflation?

[Lord Freud]

I am really pleased to take this opportunity to reply and to tell noble Lords that universal credit is on time and on budget. The Prime Minister is looking at how to pull the welfare system into the future by asking some fundamental questions that we all need to think about.

Mental Health: Access to Work Support Service

Lord McKenzie of Luton Excerpts

Monday 18th June 2012 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I add my thanks to the noble Baroness, Lady Thomas, for securing this debate, which is especially timely given the report released today by the Centre for Economic Performance’s mental health policy group, to which I think every noble Lord has referred. It very much sets the context for our debate by pointing out the massive inequality in the NHS in the way in which mental illness, as compared with physical illness, is treated. It also stresses, as the noble Baroness, Lady Meacher, said, the importance of completing the national roll-out of the Improving Access to Psychological Therapies programme.

We know that the costs of poor mental health are huge: costs to individual businesses in absenteeism and presenteeism and costs nationally in lost output and tax revenues and increased benefits, but costs to individuals in the aspirations blunted, the careers interrupted, the income lost and the social interactions diminished. We know that around 10 million people in the UK are affected by a mental health condition at any time. The Centre for Mental Health suggests that only about a quarter receive any treatment and that only about 19% of people with a mental health condition are in employment. In response to Dame Carol Black’s review of the health of Britain’s working-age population, the previous Government acknowledged the need to create a new perspective on health and work, that being in work is in general good for health, and that worklessness leads to poorer health. This is as much the case for mental health as for physical health and is, I believe, an agenda that is shared with the coalition Government.

We know that poor mental health is the main cause of absence from work and that with the right support individuals can be productive and fulfilled employees. This strand of thinking led to the piloting of the placing of employment advisers as a core component of the IAPT programme. Perhaps the Minister could give us an update on this. Before this evening, someone—I cannot recall who—referred to Access to Work as one of the previous Government’s best kept secrets, and we did not have many. The opportunity to shine some light on it, especially the newly commissioned service, is therefore to be welcomed. I think the noble Lord, Lord German, referred to the 2009 DWP evaluation of the programme as it was then organised, before the business model for delivery was changed. As he said, the evaluation concluded that awareness of the programme was patchy among Jobcentre Plus staff and that there was no evidence to suggest that customers found out about the programme in any systematic way, so the question posed by this debate is very relevant.

We know that this is currently a very difficult labour market and that this will continue for some time to come. Addressing the challenge that this presents for those with a mental health condition has been and will continue to be a recurring theme of our deliberations around welfare reform: the descriptors for the WCA; the fit for work, WRAG and support group determinations; the Harrington changes; the application of universal credit; and the Work Programme. In all this, the application of Access to Work for people with mental health conditions is of course to be welcomed. By definition, it applies to those who are in or close to the labour market. To get support, an individual must be in paid employment or have a confirmed start date, and the support must be needed when starting a new employment to reduce absence from work or to stay in work. The support is further available for the self-employed and for those about to start a work trial. As we have heard, the service has been contracted to be delivered by the vocational rehabilitation arm of Remploy.

If I may, I have a few questions for the Minister’s forensic approach. According to the specification, the indicative numbers for the service over the three-year contract period are between 0 and 1,615. Contrast this with the data for Access to Work as a whole, which identify 35,000 people having been helped in 2010-11 alone, of whom over 13,000 were new customers. Contrast it also with plans to make 1,500 people compulsorily redundant from the closure of the first wave of Remploy factories. If the numbers for the mental health service are realistic, that suggests just a scratching of the surface. Where will the funding come from if the take-up is to be higher?

What will the funding be for Access to Work for the current spending review? What additional resources are being made available for the new mental health service? There is seemingly a switch of funding amounting to some £15 million from the Remploy closures, but it is not clear how this is to be allocated. Under the specification, the support to be provided is limited to a maximum period of six months for any individual referral. Clearly we recognise the need to deploy limited resources in a targeted way, but given what we know, particularly about fluctuating conditions, will the Minister explain why this precise cut-off is used? How does this sit alongside the Work Programme? Is there a route for those on the Work Programme to be referred for support under this programme or indeed the existing Access to Work arrangements? If so, who bears the cost?

The contract with Remploy has been running for just six months, so these are therefore early days, but if there are any data on take-up and outcomes so far it would be helpful to know them, including the extent to which, under the right to control, customers have availed themselves of providers other than Remploy.

We welcome and support the new service, which will help some to access and some to retain mainstream employment. It is a small but important step.

Health: Needlestick Injuries

Lord McKenzie of Luton Excerpts

Tuesday 12th June 2012 Lords Chamber

[Lord Freud]

My Lords, I am not aware of underreporting. The reporting figures are actually rather low. In the past decade, fewer than 10 people have reported getting infected from being hit by a needle or other sharp object. Usually the infection, particularly more recently, is hepatitis B or C.

[Lord McKenzie of Luton]

My Lords, in March last year the Government set out their plans for reform of the health and safety system in Britain, and these included reductions in inspections. The document they published talked about:

“Areas of concern but where proactive inspection is unlikely to be effective and is not proposed”,

which included the health and social care sector. On what basis was that judgment made?

[Lord Freud]

The judgment was made on the basis of the number of injuries or incidents. Industries with a higher proportion of these were clearly ones on which one would target scarce resources. As I have just explained, the declared figures for injuries from sharps with infection are that 100,000 people a year cut themselves. However, the real concern is how many are infected, and that number is rather low.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012

Lord McKenzie of Luton Excerpts

Tuesday 22nd May 2012 Grand Committee

With those questions to my noble friend, I am pleased to support the order. We will need to return to this matter with a review and further thinking as time progresses—and certainly within the next year or two.

[Lord McKenzie of Luton]

My Lords, I begin by thanking the Minister for the manner in which he introduced the order—and I think I spotted a few kind words as well.

My noble friend Lady Drake set out our position with her usual precision and focus, so I will be brief. Auto-enrolment goes live in a few months and we should take this opportunity to reflect on the tremendous efforts that have been brought to bear, not least by my noble friend, to make it a reality. Although we do not have an identity of view with the Government on all aspects of its implementation, we acknowledge their role in taking this forward in challenging times. The introduction of auto-enrolment may not be preceded by a torch relay but its effect and indeed its legacy have the potential to outshine the other exciting event that we expect to experience later in the year.

Appendix A to the Explanatory Note sets out the impact of changing the earnings trigger and the upper and lower limits of the qualifying earnings band. My noble friend Lady Drake focused on our major concern: the impact of the raised earnings trigger. As she explained, far and away the biggest number of losers are women. There seems to be an implicit assumption—which was in a sense reiterated by the noble Lord, Lord German—that these would be persistent low earners. I would be interested to know what evidence there is for that. If we wanted to align it with something that had a PAYE component, what about the primary threshold, for example?

I looked at the Government’s response to the consultation. The reason given for excluding the primary threshold was that there was no tax relief at the lower end. How much work have the Government done on this? I went to the HMRC website to remind myself of the rules on tax relief for pensions. It states:

“Usually, your employer takes the pension contributions from your pay before deducting tax (but not National Insurance contributions). You only pay tax on what’s left. So whether you pay tax at basic, higher or additional rate you get the full relief straightaway. However, some employers use the same method of paying pension contributions that personal pension scheme payers use—read more in the section on 'Personal pensions'”.

That section states:

“You pay Income Tax on your earnings before any pension contribution, but the pension provider”—

this is for personal pensions—

“claims tax back from the government at the basic rate of 20 per cent. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you pay tax at higher rate, you can claim the difference through your tax return”.

What happens if you do not pay tax?

“If you don't pay tax you can still pay into a personal pension scheme and benefit from basic rate tax relief … on the first £2,880 a year you put in. In practice this means that if you pay £2,880 the government will top up your contribution to make it £3,600. There is no tax relief for contributions above this amount”.

So the assertion that there is no tax component available simply because you are below the tax threshold is not true. I recall that the proposition was that NEST would adopt that alternative means of generating tax relief for people who went into the NEST scheme. Will the Minister outline in some detail the extent to which that issue was factored into the considerations; and confirm what the position of NEST is intended to be in relation to the routes by which people may get tax relief when it is introduced?

It is a great pity that the issue of the trigger has left us apart. The noble Lord, Lord German, instanced the fact that the tax threshold may rise to £10,000—part of a wider deal, I understand. We will see whether and when that comes to fruition, but it will simply exacerbate the problem that my noble friend Lady Drake outlined in such detail. I hope the Minister can deal with that point.

[Lord Freud]

My Lords, I said I was expecting a robust debate. It has been short but typically robust. What has clearly come through is that the figures around the earnings band seemed to get general acceptance in this Committee, and the real issue we are discussing is the trigger level. It is common ground that it would be pretty hard to find an earnings trigger that would target auto-enrolment perfectly. Our aim is to maximise pension saving for those for whom it is valuable, and minimise the number captured of those for whom it is not. Clearly this is not a perfect science.

The rise in the value of the trigger takes us to the impact on the low paid. As noble Lords pointed out, on balance many more women are in this category—in particular years, though it may not be a continuous position. I should put on the record that the rise from the £7,475 threshold to £8,105 excludes does not exclude 75,000 women; the figure I have is 100,000. We might as well get that on the record. Of those affected, my information is that 82% are women. We recognise that women are more likely to work part time or work less than men, and that they will be disproportionately represented in the group excluded from automatic enrolment by the increase in the trigger.

With the trigger, and automatic enrolment generally, we are talking about soft compulsion. We have developed a system that aims to capitalise on inertia—the default is saving, but we have left people who are new to pension saving to opt out if they consider that they really cannot afford it. Automatic enrolment with an employer contribution is an incentive to save. For the first year, certainly, we do not want to encourage people who do not earn enough to pay tax to divert wages into a pension pot unless their circumstances mean that it makes financial sense.

A question was asked based on reading three pages of the HMRC site, which was very assiduous. Tax relief was one of the factors considered, but not the only one. Maintaining an adequate gap between the trigger and the bottom of the earnings band was also relevant. We also needed to make sure that the right people—those who could afford to save—were enrolled.

There are two ways for a pension scheme to access tax relief for individuals. As the noble Lord, Lord McKenzie, said, schemes using relief at source can get tax relief at the basic rate even if the individual is not a taxpayer. However, where a scheme uses a net-pay arrangement, individuals can get tax relief only if they have taxable earnings. To answer the specific question, NEST will use the former, so that all members can get that tax relief.

[Lord McKenzie of Luton]

Does that mean that the tabulation in the Government’s response—which says that if the trigger is set at the primary threshold, it is not tax relievable at the lower end—would only run in some circumstances and would not run for many scheme members, particularly if they were members of NEST?

[Lord Freud]

Yes, on the basis of what I have just said, that is quite clear. For those saving in NEST, the figures would not work, while those saving in some other way, as the legislation currently stands, would not get the relief. NEST: yes; others: no. I think the silence behind me suggests a good spot there and I suspect we may look at that particular issue or anomaly —we may.

With the gently-gently approach of phased contributions starting at a modest level, we hope that we will not trigger a rush to the exit, but we do not know. We know what people tell researchers when they are asked. We can look at the opt-out rates in those countries that have similar systems. However, in the end, the evidence shows that if people feel they cannot afford it they are more likely to walk away, and the whole issue of pensions stays in the “too difficult to think about” pile. We are feeling our way here and there will be chances to make adjustments.

Youth Unemployment

Lord McKenzie of Luton Excerpts

Monday 14th May 2012 Lords Chamber

[Lord Freud]

I will look at that because one of the central thrusts of our policy is to ramp up apprenticeships. One of the most encouraging signs I saw when I visited a work programme contractor the other day was the way that having sustained outcomes—long-term jobs—is driving it towards putting youngsters into apprenticeships. That is a very happy fact pulling them together, and I will very happily look at anything we can do to reinforce the drive to apprenticeships.

[Lord McKenzie of Luton]

My Lords, will the Minister explain why the Government have taken the decision to exclude disabled young people on the work choice scheme from accessing wage subsidies under the youth contract? Does that not mean that they will be doubly disadvantaged?

[Lord Freud]

My Lords, we are trying to tier a structure of programmes where work choice, which is supported with its funding, is the way that young disabled people are supported.

Workers’ Memorial Day

Lord McKenzie of Luton Excerpts

Monday 23rd April 2012 Lords Chamber

Asked By

[Lord McKenzie of Luton]

To ask Her Majesty’s Government what plans they have to mark Workers’ Memorial Day on 28 April.

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

My Lords, the Government extend their sympathy to all those for whom Workers’ Memorial Day is especially poignant. It is right to commemorate those killed, injured or made ill through work. The day also highlights the importance of good health and safety in the workplace. The Government continue to recognise Workers’ Memorial Day and consider that families and friends of those affected, and organisations representing workers, are best placed to decide how the day should be commemorated.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply, which I take to be personally sympathetic to Workers’ Memorial Day—which, as he said, is about remembering those who have been damaged by health and safety failures, and renewing the case for good health and safety provision. The Minister will have been availed of the report of Professor Löfstedt, which the Government commissioned. It states that,

“the vast majority of employers and employer organisations acknowledged the importance of health and safety regulation in their responses to the call for evidence and felt that, in general, the regulations were broadly fit for purpose. During the course of my review, I have neither seen nor heard any evidence to suggest that there is a case for radically altering or stripping back current health and safety regulation”.

Does the Minister agree with that? If he does, will he encourage the Prime Minister to refrain from such unhelpful utterances as “killing off the monster of health and safety”, and to act responsibly in these matters?

[Lord Freud]

My Lords, we are very supportive of the report by Professor Löfstedt. He made the point in the report that legislation,

“can contribute to the confusion, through its overall structure, a lack of clarity, or apparent duplication in some areas”.

That is why we are driving through reforms designed to make the system easy to understand, easy to administer and easy to enforce.

Occupational Health Services

Lord McKenzie of Luton Excerpts

Thursday 1st March 2012 Lords Chamber

[Lord Freud]

My Lords, that is absolutely smack on what the sickness absence review is looking at and whose recommendations we will be examining. The noble Baroness mentioned Rhyl. There have indeed been some quite remarkable improvements in this area. The project with which I was most impressed was in Lincolnshire, where triage was available on the same day. Advice, triage and signposting dramatically reduced the level of absence from work and, indeed, reduced the number of sessions of prodding that were required.

[Lord McKenzie of Luton]

My Lords, one of the long-standing issues around occupational health services and intervention physiotherapy, particularly those which are accessible through the workplace, is the tax treatment of the cost, and in particular, whether it is an assessable benefit on individuals. I imagine that the likes of Barclays Bank have a way round this, but can the Minister say what the Government’s general approach is?

[Lord Freud]

As you know, my Lords, I always find it difficult to say what the Chancellor may or may not do at any time in the future, so I will avoid that. However, I will point out that there was a recommendation in the sickness absence review to have some of those services tax-allowed by the employer. The recommendation is there and we will clearly look at it.