Health: Pneumoconiosis

Lord McKenzie of Luton Excerpts

Wednesday 29th February 2012 Lords Chamber

[Lord Freud]

My Lords, if there are discrepancies between miners and quarrymen, I will go back and look at them. I was not aware that there were such discrepancies. I will look at them and take whatever measures are required.

[Lord McKenzie of Luton]

My Lords, as we know, one of the challenges of long-latency diseases is the tracing of old employer liability insurance policies. The noble Lord referred to that a moment ago. Will he be more specific about progress on the Employers’ Liability Tracing Office, and in particular whether it is now accepted that there should be back-filling of policies to November 1999—the start of the code—rather than applying it only to future policies? Will the Minister also say whether there has been progress on ELIB, the bureau of last resort when employer liability policies cannot be traced?

[Lord Freud]

My Lords, although there has been silence since the document came out in May 2010, I assure the noble Lord that there has been a lot of activity behind the scenes. I am holding discussions with all the relevant parties and I hope that I am making progress on the matter of tracing. Noble Lords will be aware that when a company disappears some claimants simply cannot find their insurance. That matter is under active discussion.

Employment: Work Programme

Lord McKenzie of Luton Excerpts

Wednesday 29th February 2012 Lords Chamber

Asked by

[Lord McKenzie of Luton]

To ask Her Majesty’s Government what progress is being made by the Work Programme in assisting benefit claimants to find employment.

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

My Lords, the Work Programme provides personalised support for the long-term unemployed and those at risk of long-term unemployment. By the end of October 2011, 332,000 people were already receiving this support. We will publish the first statistics on job outcomes in the autumn.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his reply. As the recent NAO report made clear, the Work Programme has been bedevilled by the speed of its introduction, which included a lack of piloting, going live before the IT was in place, and compiling the business case after the decision to proceed. Perhaps this is why the Government are a little coy about releasing data, although such relevant data as we have show that benefit off-flow rates are down, not up; that referrals to the Work Programme include only a trickle of the hardest to help; and the haemorrhaging of voluntary and community sector providers. Will the Government now at least permit providers to publish their own performance data and, under the Government’s own data work programme, arrange for the publication of user satisfaction information?

[Lord Freud]

My Lords, I must point out that the NAO acknowledged that the Work Programme addressed significant weaknesses of previous programmes; that key elements within it improved affordability and drove value for money; and that it was a significant achievement to introduce it in a year. It is expected to help more people more effectively and for less money than previous programmes. As for information, ERSA has put out some information about what happened to the first cohort. It said that people got into jobs at a rate of between 18 per cent and 23 per cent, which was more or less in line with the expectations of the industry.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, perhaps I may ask the Minister to answer the question I posed. Will the Government now permit providers to publish their own performance data?

[Lord Freud]

My Lords, I thought that I had made that clear. Some performance data have been put out by ERSA. We are discussing with ERSA what kind of performance data it can put out. Clearly, we have to be careful that the information that goes out from the providers cannot undermine what the national statistics will say. That is the issue.

Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Wednesday 29th February 2012 Lords Chamber

[Baroness Grey-Thompson]

My Lords, briefly, I commend the noble Lord, Lord Best, on his determination with the amendment and offer him my support. I will not repeat the words of the noble Lord, Lord Kirkwood of Kirkhope, but he is absolutely right when he talks about reassurance. It is so unfortunate at this stage of the Bill that many people who may find themselves in really difficult situations, perhaps through being in the wrong place, will be extremely disappointed that we cannot take this further. As we have read in the press yet again today, many disabled people are being portrayed as benefit scroungers. That causes me great concern as we make some of these changes. The review is vital if we are to ensure that our worst fears are not realised.

[Lord McKenzie of Luton]

My Lords, we support the Motion proposed by the noble Lord, Lord Best, and I, like others, thank him for the persistence, diligence, precision and passion with which he has pursued this subject from the start of our proceedings. I very much agree with the noble Lord, Lord Kirkwood, who said that this is no way to go about tackling issues of underoccupation; a much broader, more sophisticated approach is needed. It is a pity that we are stuck at this stage with, basically, having to live with what is in the Bill, subject to the review.

We have been told again that the amendment that we sent to the other place is an infringement of its financial privilege. It disdainfully clings to that financial privilege, which it could waive, without regard to the consequences for hundreds of thousands of households who will bear the financial burden of these cuts, in the same dismissive way that the Prime Minister today announced that the Bill would complete its parliamentary passage before noble Lords had even convened to consider it further. They brush aside our amendment, with its protection for families, notwithstanding that for some there are no smaller properties for them to move to; regardless of the fact that, for some, their disability involves them in additional costs which will be more difficult for them to meet and given their housing benefit reductions; and ignoring that many do not have a route to work to mitigate loss of benefit. The noble Lord, Lord Best, was absolutely right not to water down the amendment further and try to pick and choose which of those categories of individual is more deserving of escaping this iniquitous provision than the others.

Throughout the various stages of the Bill, we have sought to press on the Government the innate unfairness of the provisions concerning underoccupation. As we have heard, the arguments advanced have variously included the following. There is the appropriateness of adopting the CLG definition of underoccupation—a measure which provides sensible flexibility for households as family arrangements wax and wane, health conditions change, and young children grow older. There is the acceptance that only if there is suitable alternative smaller accommodation should families be expected to move, notwithstanding that that may be totally disruptive to their lives, and that meeting a housing benefit shortfall by getting a job or working more hours should not be insisted on where claimants are simply not able to work.

The losses in housing benefit a week, whether of £12, £13 or £14, cannot be borne without driving more households closer to or into poverty. Most are not sitting on substantial savings to cushion the loss of benefit; if they were, they would be ineligible for housing benefit in the first place. Moving to the private sector is likely to lead to increases in housing benefit costs for the Government rather than reductions. Taking in lodgers to contribute to the housing benefit shortfall will simply not be possible or desirable in many family circumstances. It is a false economy to force disabled people to move from a property which has been substantially adapted. To make it more difficult for those involved in foster caring makes no sense on many levels.

Your Lordships have supported those arguments, but they have been rejected by the Government in Committee, at Report and, now, at ping-pong. The only acknowledgement of the havoc, despair and poverty they will create is a £30 million annual top-up to discretionary housing benefit. Even that, as we heard from the noble Lord, Lord Best, is funded by an increase in the housing benefit reductions for all.

The Government know full well that these clauses will not solve the problem of underoccupation of social housing. They cynically do not want to solve it, otherwise their intended savings will simply not materialise. The offer they make is to move further afield, away from your community, support network, friends and jobs—not a sensible proposition, as we heard from my noble friend Lady Lister—to take a lodger, to use your savings or to earn more money. That is essentially a bogus offer, because most will simply not be able to take it up.

If we cannot persuade the Government, the least we can do is to have arrangements which will confront them with the consequences of what they implement. That is why we support the Motion tabled by the noble Lord, Lord Best, which requires an independent review of the consequences of Clauses 11 and 68. Of course, it will not be just that review which explains what is going on. Local authorities, councillors, MPs, and voluntary and community organisations—and, indeed, the courts—will get the blast from this in little over a year from now, as the cuts begin to bite.

We do not deny the need to tackle the deficit, nor that that means some hard choices, but it is genuinely difficult to understand why this contribution is sought in this way to this extent from this group of people. The alleged cost of our previous amendment, £100 million, is, when we think about it, just 20 per cent of one company’s tax avoidance schemes.

However, that is what both partners in government have chosen to do, and we have not been able to persuade them otherwise. We hope that an independent review will reinforce the points that we have made and still persuade the Government to a different view. If the review concludes otherwise, we can have no complaint.

This is not the end of the matter; it remains work in progress; but this debate marks the conclusion of our deliberations on the Bill, a Bill that we have been able to improve in some respects, but which, in too many ways, imposes unacceptable burdens on the most vulnerable. They are entitled to better from their Government.

[Lord Freud]

My Lords, let me start with two points. The first is that we plan to move ahead with these changes. The second is that I pick up the point made by my noble friend Lord Kirkwood. I heard very clearly what he said about housing strategy. On this measure, of the 3.3 million tenants living in the social rented sector and receiving housing benefit, only about one in five is expected to be affected by this change. Some will move to more suitably sized accommodation and will get support to do so. However, if social sector tenants choose to stay where they are and meet the shortfall through employment, we will offer them help in doing that. As noble Lords know, this measure applies only to working-age people. The substantial investment that we are making in the work programme and in universal credit will ensure that people are supported to find work and that work really will pay.

Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2012

Lord McKenzie of Luton Excerpts

Monday 27th February 2012 Grand Committee

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

My Lords, the Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2012 were laid in draft before the House on 19 January. They are regarded as being compatible with rights under the European Convention on Human Rights and are being introduced so that recipients of jobseeker’s allowance who have been victims of actual or threatened domestic violence can continue to receive jobseeker’s allowance without having to meet the requirements to be available for and actively seek employment, and to have a jobseeker’s agreement. The term “domestic violence” is defined in the regulations and includes physical, psychological, financial, emotional and sexual abuse.

The regulations apply to victims of actual or threatened domestic violence by a partner, former partner or certain family members of the claimant, their partner or former partner, and allow them to access the exemption from the jobseeking conditions for an initial period of four weeks if the incident took place within the 26 weeks before the claimant notifies Jobcentre Plus about it, provided that the claimant is not living at the same address as the perpetrator at the time of the notification. If the claimant then provides written evidence of the kind required by the regulations during the initial four-week period, the easement period will in effect be extended to 13 weeks. Claimants will be able to access the easement only once in any 12-month period.

During debates on the Welfare Reform Act 2009, the Lords requested an automatic 13-week period due to concerns that jobcentre advisers might refuse access to the existing domestic emergency exemption in such cases because they may not understand the impact of domestic abuse on individuals and their children. The domestic emergency deferrals are allowed at the discretion of Jobcentre Plus advisers and allow four one-week periods within 12 months for individual incidents of emergency, such as a death in the family or domestic violence. These four one-week periods can run consecutively, if appropriate. For those with dependent children, one of the weeks may be extended to eight weeks, resulting in a total maximum of 11 weeks’ deferral.

The main differences between the domestic emergency process and the new domestic violence process is the need for evidence in the 13-week deferral and the fact that victims without dependent children receive the same number of weeks’ exemption as those who do not have dependent children. Clearly the domestic emergency exemption also covers a wider range of situations. We would not expect victims of domestic violence to use both exemptions routinely, but the fact that they have an alternative available when they do not want to produce evidence, and in appropriate cases could use both exemptions in order to extend the time they are exempted from the jobseeking conditions, shows how seriously the Government take this issue.

During the debates on the Welfare Reform Bill 2009, noble Lords were concerned about the impact of domestic violence on lone parents with older children as, prior to the introduction of changes to entitlement to income support for lone parents, this group would have claimed income support and not have been required actively to seek work until their youngest child reached the age of 16.

Currently, a lone parent can claim income support only until their youngest child reaches the age of seven and this age is being lowered to five later this year, subject to Royal Assent of relevant provisions in the Welfare Reform Bill and the making of regulations. There is strong evidence to support the amendment. Although no research exists on the impact of domestic violence on JSA recipients in particular, there are data on the incidence of domestic violence in the wider community.

We are aware that 7 per cent of women and 5 per cent of men reported having experienced domestic abuse in 2010-11. This is the equivalent to an estimated 1.2 million female victims of domestic abuse and 800,000 male victims. We also know that non-physical abuse, such as emotional and financial abuse, was the most common type of abuse, with the figures showing around 57 per cent of women and 46 per cent of men being victims. Furthermore, the British Crime Survey 2010-11 showed that three-quarters of all incidents of domestic violence were experienced by previous victims. Of the victims interviewed, just under one-half had been victimised more than once and nearly one-quarter had been victimised three or more times. We are also aware that four out of 10 lone parents reported domestic abuse in their previous relationship.

The proposed exemption is designed to reflect the fact that victims may experience domestic abuse at the hands not just of partners but of other family members. This can include parents and a range of other relatives, including children. This is wider than the group originally envisaged by noble Lords in the original debates in 2009 as the Government recognise that domestic violence is not restricted to those in intimate relationships and believe that support should be offered to those victimised by family members, including members of a partner or a former partner’s family.

For victims on JSA to take advantage of the exemption they would need to disclose the abuse. There is a consensus within the evidence that domestic abuse is underreported and that victims may be unwilling to disclose abuse, particularly to officials. For example, figures from the British Crime Survey 2008-09 show that only 3 per cent of victims have disclosed abuse to a benefits agency. For this reason we think that the exemption may be taken up by about 3,000 JSA claimants per year.

In order to help formulate the policy, the department undertook informal consultations with specialist organisations, such as Women’s Aid and the Child Poverty Action Group. As a result, a number of changes were accepted. These included the first four weeks to be consecutive; all claimants will be able to access this time, if they meet the conditions, without the need to provide evidence. The remaining nine weeks need not be consecutive and can be accessed only on the production of relevant evidence.

Jobcentre Plus will introduce a pro forma for use by victims and organisations who wish to use it; and employers and trade union representatives were added to the list of those eligible to provide evidence. Those consulted expressed concern about imposing limits on the time a claimant can have to obtain evidence and about having a maximum allowable deferral period. This was because research on behaviour in abuse cases shows that victims may take two or three years to leave the abusive relationship permanently, there may be a number of incidents of abuse in that time and the victim may therefore need support over a longer period than 13 weeks.

The Government consider it unacceptable to offer longer periods on jobseeker’s allowance without the need to meet the jobseeking conditions, because JSA must remain a benefit for those able to seek and undertake work. It is therefore necessary to limit the time that claimants can be treated as meeting the jobseeking conditions. Those with problems that cannot be resolved within the 13 weeks of the deferral may be able to be treated as available for and actively seeking employment for up to a further 11 weeks under the procedures for claimants experiencing domestic emergencies. The Government consider that anyone who is not able to undertake jobseeking activity after the maximum periods that these two deferral periods allow should not be eligible for JSA.

Although the easement has much to commend it, thanks in large part to the research and consultation that have been undertaken since the introduction of the easement under the Welfare Reform Act 2009, it leaves us with duplicate processes that are more complex to operate than we would wish. I have therefore requested that, in advance of the introduction of universal credit in October 2013, staff should consider ways of streamlining the support system for victims of domestic violence who are jobseekers to keep the best of the two systems and to simplify the process.

I hope noble Lords will agree that these current changes are worth while and necessary to ensure that victims of domestic violence receive the support they require to help them achieve financial independence at a time when they are unable to take up work. With those words, I commend the regulations to the Committee.

[Lord McKenzie of Luton]

My Lords, I am grateful to the Minister for introducing these regulations so comprehensively and for setting out the scale of domestic violence, which sadly is prevalent in our society. As he says, the measure flows from the Welfare Reform Act 2009. I recall being pressed hard on some of the issues in which we engaged at that time.

I have a few questions for the Minister. I understood that he referred to a definition that included psychological pressure. However, the definition in the regulations states that,

“‘domestic violence’ means abuse of a kind specified on page 11 of section 2.2 of ‘Responding to domestic abuse: a handbook for health professionals’”.

I raise that in particular because a cross-government consultation has been undertaken to look at a general definition of “domestic violence” that could be shared across all departments. I want to be clear about that. I am not sure whether I have missed anything, but that is what I understand the position to be.

Why does the measure apply only once in a 12-month period? Why is that a “magic” cut-off point and does it reflect reality? Why can it operate only when the victim, or potential victim, of domestic violence is not living at the same address as the alleged perpetrator? That seems to me to be a valid point, particularly as part of the rationale for the four-week and 13-week periods was to enable someone to look for alternative accommodation. They may have short-term accommodation in a refuge, but I am not sure that an individual would be able to move out of a house in all circumstances, particularly if the abuse is threatened rather than actual. I wonder why that constraint is included. How will the measure be carried into universal credit? I accept entirely what the Minister said about rationalising the two systems so that they operate more effectively, which I think includes the assurance that the measure will be carried forward into universal credit.

In a similar vein, there are provisions in the housing benefit regulations that allow housing benefit to continue to be paid—I think sometimes for two addresses—when someone has had to move out of accommodation because of domestic violence or a threat of domestic violence. Do we have an alignment of the definitions for those purposes so that the two concepts sit together? The reforms to legal aid will restrict access to representation in family court proceedings, which makes these provisions all the more important. As regards legal aid, there are concerns about the high level of evidence that has to be produced. I do not know whether the Minister can comment further on the type of evidence that it is envisaged will be needed to access the benefit of these easements. I was pleased that, as I understand it, after 13 weeks there can be, if necessary, a further 11 weeks under the domestic emergency provisions, after which someone should cease to be on JSA if they are traumatised and in difficulty because of these circumstances.

As I understand it, the cross-government consultation has not just looked at making sure that coercive control using power and psychological control is brought within the definition of domestic violence or threats of domestic violence but at the age cut-off point. Currently, the definition extends only to someone who is 18 or over and not to 16 or 17 year-olds. Clearly there could be some circumstances in which 16 or 17 year-olds come within the scope and are able to claim JSA. There is a mismatch here, and I wonder how it will be dealt with.

All in all, I am pleased that the regulations have been brought forward and I congratulate the Government. However, I would be grateful for the answers to my few questions.

--- Later in debate ---

[Lord Freud]

My Lords, as one would expect, this has been an interesting debate with some valuable contributions. I shall try to deal with the questions—slightly at random, if noble Lords will forgive me.

The evidence can be supplied by a very wide range of bodies: healthcare professionals, the police, registered social workers, employers, trade union reps, and public, voluntary or charitable bodies. My noble friend Lord German was concerned about the process being slow, but that is probably a pretty rare circumstance. Clearly there is the back-up of the domestic emergency discretion that is allowed to Jobcentre Plus when, after four weeks, the letter has not arrived and it looks as though the body is being slow in supplying it.

Both the noble Lord, Lord McKenzie, and the noble Baroness, Lady Lister, raised the issue of not living at the same address. Of course, that is how the primary legislation was framed; it says something about having to leave the address. The regulations provide financial support for a person when they have left the address, and the support is provided in order to help a person to move on. However, this is an interesting point. The noble Baroness, Lady Lister, talked about the interplay between conditionality and violence. I will bear that in mind as we look at universal credit, for which we are ramping up the conditionality. There might be households in which on the one hand the state says “go to work” and on the other hand the partner is using violence to prevent that. I suggest that that is an interesting, although I suspect rather narrow, group, but we need to keep it in mind. Overall, the purpose of this easement is to support changes in individual circumstances. That is what it is for, and clearly staying in the same place would not mean that such a change was made.

[Lord McKenzie of Luton]

It would be consistent with what the noble Lord has just said if a claim could be made without the claimant having had to have moved out of the accommodation. The claimant might wish to do that and be in the process of trying to move on. I am not sure how this is framed in the primary legislation and maybe that is where the problem lies. The prohibition seems to relate to living at the same address at the point when the claim is made, but that might just be a temporary transitional arrangement as someone seeks to move on for obvious reasons.

[Lord Freud]

I will come back with formal written confirmation, but my understanding is that the legislation is framed in terms of there having been a move rather than a move being contemplated. As I say, I will write to confirm that, but I feel relatively confident about that point.

I want to pick up on the point made by my noble friend Lord German and by the noble Lord, Lord McKenzie, about the definition. For technical reasons the word “abuse” was not used in 2009. The term used was “violence”, but I think that things are moving on. However, the substance of the title makes it clear that we are not referring to situations in which there is physical abuse—my noble friend read out the wide definition set out in the handbook. On the point made by the noble Lord, Lord McKenzie, we are using a wider definition than the cross-government one that is in current use. I refer in particular to the point about the under-18s because we do have people who are less than 18 years old and they are not excluded from this regulation. That is one of the issues that the Government are looking at in the cross-government discussion.

Social Security Benefits Up-rating Order 2012

Lord McKenzie of Luton Excerpts

Monday 27th February 2012 Grand Committee

[Lord Freud]

My Lords, the Social Security Benefits Up-rating Order 2012, the Guaranteed Minimum Pensions Increase Order 2012 and the Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2012 were laid before the House on 30 January 2012, and I am satisfied that they are compatible with the European Convention on Human Rights. I will speak first to the two smaller orders: the first order makes minor amendments to protected rights; the second order increases guaranteed minimum pensions—GMPs. We will then discuss the up rating of state pensions and benefits.

The Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2012 makes minor amendments to the Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2011 in relation to amendments to be made to the Insolvency Act 1986 and the Pensions Schemes Act 1993 in respect of protected rights payments. By way of context, the 2011 order, which was approved by the House early in June last year, makes consequential amendments to primary legislation as a result of abolishing contracting out on a defined contribution basis on 6 April 2012, which is provided for in the Pensions Act 2007 and the Pensions Act 2008.

Just before the debate in the House last June, an issue was noted that related to how the proposed amendments in Article 3 of the 2011 order would work. When introducing the debate, I therefore outlined the background to the Committee and said that we would address the issue, which we are doing now. Having previously made that statement, I do not propose to take up more time with further explanation, other than to say that the instrument before the Committee amends the 2011 order, before it comes into force, to remove the exclusion of protected rights payments from what counts as income for the purposes of income payments orders made under Section 310 of the Insolvency Act 1986, and from the scope of Section 159 of the Pension Schemes Act 1993, which provides that GMPs and protected rights payments cannot be assigned or charged. Both the amendments will ensure consistency with changes made to the Bankruptcy (Scotland) Act 1985 by Article 2 of the 2011 order. This is consistent with our original policy intention that the tracking of protected rights would cease after the abolition of DC contracting out.

The Guaranteed Minimum Pensions Increase Order 2012 provides for contracted out, defined benefit schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 3 per cent. Such increases are in line with the growth in prices or 3 per cent, whichever is the lower, and this year the 3 per cent cap will apply as inflation is higher.

On the uprating order, I am sure noble Lords will welcome our decisions on increases to benefits in 2012. In total, the Government will spend £6.6 billion on uprating benefits in 2012. Alongside other measures that we have taken, it will deliver fairness to those who have worked hard all their lives, and protection to the most vulnerable in society during these difficult economic times.

The consumer prices index, the CPI, remains our preferred measure for pensions and benefits indexation. We made this change at last year’s uprating; some noble Lords may remember our extensive discussion on the relative merits of the price indices. I will not repeat myself on these points—despite the enjoyment I would gain—save to reiterate that the CPI is the Bank of England’s target and the headline measure of inflation in the UK. It relates to a basket of goods, which is more appropriate for pensioners and benefit recipients because it excludes mortgage interest and is less volatile than the retail prices index, the RPI, which fell negative two years ago, with the result that many pensioners had their additional state pension frozen. The CPI methodology takes into account how consumers respond to price changes—an advantage that has won the support of many experts. Last year, the High Court upheld the Government’s decision that the CPI could be used for pensions and benefits uprating, and we have robustly defended our case in the Court of Appeal. In April the Government will implement the full September CPI increase of 5.2 per cent across pensions and social security benefits.

I will now discuss in more detail the individual benefit rates amended by the legislation. One of this Government’s first actions was to restore the earnings link with the basic state pension. We went a step further and promised a triple guarantee to increase the basic state pension by the highest of the growth in earnings, the growth in prices or 2.5 per cent. In line with the triple guarantee, the basic state pension will rise 5.2 per cent to £107.45 per week, in line with the growth in the consumer prices index. This is an increase of £5.30—the largest ever cash increase to the basic state pension. This means that this year the basic state pension is forecast to increase to 17.1 per cent of average earnings, which is a higher share of average earnings than in any year since 1997.

The basic state pension goes to more than 11 million pensioners in this country, and both this year and in the long term the triple guarantee will ensure that the basic state pension will provide a solid foundation on which recipients can build a retirement income. The triple guarantee will protect the value of the basic state pension in the long term. It is estimated that the average pensioner retiring this year on a full basic state pension will gain £13,000 over the course of their retirement as a result of the triple guarantee, compared with the old prices link.

From April this year the additional state pension will also rise by 5.2 per cent, which will mean that those with a state second pension or state earnings-related pension, SERPs, will see the 5.2 per cent increase in both their basic and additional state pension income. This means that the increase in total state pension income for someone with a full basic state pension and an average additional state pension will be about £6.70 a week: £348 a year.

The standard minimum guarantee in pension credit is the means-tested support that ensures all pensioners a minimum level of income in retirement. The legislation requires us to increase the minimum guarantee at least in line with earnings, so that over the long term the poorest pensioners see their incomes rise in line with that of the working population. However, this year the relevant earnings index stood below inflation at 2.8 per cent. We judged it unacceptable that the poorest pensioners on the guarantee credit would see the lowest increases. We wanted to ensure that those pensioners saw the full increase given to the basic state pension, and we will therefore increase the single rate of the standard minimum guarantee by £5.35, taking it to £142.70 per week in 2012.

To ensure that the overindexation of the guaranteed credit is affordable, we will make some changes to the savings credit element of pension credit. In April, we will increase the savings credit threshold to £111.80 for individuals. This will mean that those with higher levels of income may see less of an increase, but no one should have a lower weekly income as a result of the uprating. This policy also enables us to focus spending on the poorest pensioners on guaranteed credit.

On working age benefits, the Government have ensured that, even in these difficult economic times, benefits for disabled people and their carers and for those out of work and seeking employment will see the full CPI increase of 5.2 per cent. This increase will ensure that the most vulnerable people in society are protected and that those looking for work get the support they need to move into the labour market.

Through the uprating order, the Government are spending an additional £6.6 billion in 2012. This means £4.5 billion more on pensioners, more than £1 billion more on disabled people and their carers, and more than £1 billion more on people who are unable to work through sickness or unemployment. Even in these tough economic times, the uprating commitment that I have outlined today will give real support to the poorest and most vulnerable in society. I therefore commend the orders to the House. I beg to move.

[Lord McKenzie of Luton]

My Lords, at the start, we acknowledge that the Government have rejected the voices within their ranks that would have watered down even the full CPI increase for these upratings. The order before us deals with most out-of-work benefits, but it of course does not deal with changes to tax credits, which we shall debate shortly.

We have heard from the Minister that the upratings order amounts to increasing benefits by £6.6 billion, but that is dealing on one basis with the effects of inflation; it is not addressing the real cuts that are being made to employment support allowance, housing benefit, support for disabled children, DLA, council tax benefit, child benefit and tax credits. By 2015-16, just three years hence, the Government will be pocketing £10 billion-plus per year from the CPI switch to benefits, tax credits and public service pensions.

We have no points to raise on the Guaranteed Minimum Pensions Increase Order, and support it.

On the abolition of protected rights consequential amendments order, we have some brief questions. Post-abolition of contracting out on a DC basis, schemes will not be required to keep track of protected rights payments, so, as we have heard, the court will not be able to identify them when setting income payment orders for a debtor. Consequently, protection of accrued rights payments from income payment orders will now be retrospectively removed. Does that mean that creditors can ask for income payment orders to be revisited in the light of that loss of protection? If trustees amend their scheme rules to reflect the abolition of protected rights and a scheme member is subsequently subject to an income payment order, could the trustees be in breach of Section 67 of the Pensions Act 1995, a section that protects accrued rights and for which there is no statutory override? The order has the consequence of retrospectively removing protected rights accrued, albeit in the instance of an income payments order being issued. Is a precedent being set here, and would it not have been possible to set some sort of pension income threshold below which the courts cannot take account of income when issuing income payment orders as an alternative approach?

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[Lord Freud]

My Lords, it is a lot easier to spend £6.6 billion extra than to remove it. I accept that noble Lords are pleased that we are sticking to the CPI September figure—the 5.2 per cent—even though it is a high figure. It is important for the Government to do that because once you start moving the figure around to suit your convenience the suspicion arises that there is no principle behind that decision and that it is done to save money. Therefore, you save money in one year but there is a lack of confidence in the longer-term strategy. The point about the CPI is that these things even out, although the figure that is arrived at in a particular year might be painful for the Government’s finances. Clearly, this year it is painful to stick with that figure. However, if you stick with the same month, given that it is an annualised figure—it lasts a whole year—it should even out. Albeit that this is a very difficult year, there were some siren voices demanding that we take a particular course, as the noble Baroness, Lady Lister, said. However, it was decided that to do something other than what we have done would undermine the principle of the measure.

I would like to pick up on the point about the triple lock. I think that the noble Lord, Lord McKenzie, has been a little grudging about what we are doing with that, which is trying to drive up, over the long term, the level of the basic pension compared with average earnings, because it has lost that relationship. The problem with that is that more and more people go on means-tested pension support, with all the complexity that noble Lords complain about. Clearly one thing that we are trying to do with the pension reform that we have consulted on is to get a liveable rate without all these special levels of support, and the triple lock is another mechanism to do that.

While I am on the topic, I confirm to my noble friend Lord German that the switch from the guaranteed credit to the savings credit and the closing of the thresholds was done precisely so there would not be a cut in the basic pension for those pensioners. While I am touching on CPI versus RPI—we will not have a major debate on that, although we all enjoy it—I want to make the point that there is work going on on the CPI. Only a relatively small proportion of the difference between RPI and CPI is because of the housing element; the rest is the substitution effect—the bulk, as noble Lords will all remember. When that work on a new CPI comes in, the Government will need to look at it and take a decision on what to do. I think that that is the best response I can give to the noble Lord, Lord McKenzie.

However, I need to defend myself slightly from the noble Baroness, Lady Lister, on what was a very interesting and excellent letter that I got on my description of the differences between CPI and RPI. I must point out that it was only one letter, which is unusual—I did not get every economist in the world writing to complain or differentiate—but I did enjoy it.

The noble Lord, Lord McKenzie, asked a large number of very good questions—as I would expect—some of which I can answer and others I will write to him about. In particular, I will write to him on the issue of guaranteed minimum protections on contracted-out pensions. That really is complex and I need to provide specific chapter and verse on those protected arrangements.

The noble Lord asked about the local housing allowance. It will be set in April 2012 to establish the baseline, and it will be uprated from a year on, based on September-to-September figures. On the migration from IB to ESA, these are technical provisions but there are some potential effects for individuals. Again, I think that that is a matter for a letter. On service charges, it is the elements of the individual items such as fuel that are raised in line with their particular price increases, and that is done—and has been done for some time—by convention rather than the aggregate.

On non-dependant deductions, as noble Lords will remember, there was an announcement that they would be moved up to match the level that they would have been at if they had not been frozen in 2001. The increases in 2012-13 have been calculated based on forecast rent growth. New income bands determine the amount of the deduction, based on earnings growth. Will passported benefits be taken into account? The answer is yes, when looking at the financial effects of uprating individual benefit elements that give rise to derived entitlements.

With regard to the effect of statutory payments on small businesses, again, I think that that is a matter for writing. We will discuss this with colleagues in BIS who are responsible for those payments and get the most up-to-date figure for the number of small businesses that have been reimbursed.

On the savings credit changes, the £200 million savings on savings credit are recycled into the guaranteed credit, so there is no net saving to the Government. This means that 30,000 fewer people will receive savings credit. Some will have their entitlement extinguished because their income is above the new maximum savings credit level. I say that in response to my noble friend Lord McKenzie—sorry, the noble Lord, Lord McKenzie. I was looking at my noble friend Lord Kirkwood, who is the other person who asks impossible questions.

The noble Lord, Lord McKenzie, asked about the impact assessment. In practice, last year’s assessment sets out the shape of the effects of applying CPI as the preferred index. That is why we have only conducted an additional equality impact assessment this year for the pension credit measures, as they are the novel measures.

I will talk to my noble friend Lord Kirkwood about his particular interest, the national insurance fund, where he looks at the way that the fund balance is moving. It is expected that it will be above the recommended level, which is a sixth of annual benefit expenditure, but I think that I will need to write to him about any change in the balance in recent years.

I think that I have dealt with all the questions. If I have missed anything, I will, of course, write. In the words of the Chancellor of the Exchequer, the uprating order of 2012 will provide support for those who have worked hard all their lives—

[Lord McKenzie of Luton]

Perhaps I may intervene. I am sorry, but I did not know whether the Minister was about to wind up, so perhaps I could revert to a couple of the questions which are left outstanding.

In relation to the savings credit and passported benefit, the issue is that if there are, as we now know, 30,000 fewer people claiming savings credit, presumably there are some savings in respect of passported benefits that would go with that. The question is whether those savings are factored into the savings needed to produce the guaranteed credit upratings.

There were a couple of other items. In relation to non-dependant deductions, it was asked whether we could be told what the reduction in housing benefit and council tax benefit is estimated to be as a result of those changes. In relation to the small business issue, and the £45,000 threshold, I was trying to determine whether, because of increases in national insurance and fiscal or national insurance drift, the same thing would happen as with tax drift, where effectively more people are being excluded from the benefit of 100 per cent reimbursement, because in real terms it is declining.

There is one other issue—perhaps the Minister could deal with it in writing—which is the relationship between the uprating of guaranteed credit and the basic state pension. I am indebted to my noble friend Lady Drake for bringing to my attention some interesting material produced by the PPI showing the impact of pension credit over several years. The component that would produce the biggest reduction in the percentage of pensioners living below 60 per cent of median income would be if the current policy plus guaranteed credit were indexed to the triple lock. That would have a more beneficial outcome than the current policy, where guaranteed credit is indexed to earnings, although I accept that this year it is earnings-plus, but that is still not the same as earnings plus the 5.2 per cent.

[Baroness Lister of Burtersett]

To save the Minister getting up and down, I would appreciate a comment on the point that I made about child benefit. Perhaps it is more appropriate for the noble Lord, Lord Sassoon. What is the logic of putting so much emphasis on increasing personal tax allowance in real terms and then freezing child benefit, which is the equivalent of a personal tax allowance?

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[Lord Freud]

My Lords, I was talking about child benefit, which was an issue raised by the noble Baroness, Lady Lister. She referred to the relationship between child benefit and tax thresholds. As you move towards the universal credit system, that is the way you keep the incomes of the poorest in line. That can be done elegantly and in a more focused way than by using universal benefits, which of course is what child benefit is—using a lot of money and giving it to all in order to target the poorest. That is certainly the direction of travel that I am taking. We could possibly debate this at great length at some stage, and no doubt we will.

I will write to the noble Lord, Lord McKenzie, on the question of those excluded on the non-dependant deductions. That is a matter for a letter. I will also write on the point about small businesses because I do not have all the information to hand. On the point about passported benefits and savings credit, the 30,000 who will not receive savings credit would actually not have been passported to the full housing benefit or council tax benefit, so they could establish a claim on the ground of low income. However, the £200 million being recycled to the poorest pensioners includes an assessment of the additional cost of passporting more of those pensioners by disproportionately uprating the standard minimum guarantee.

As regards the triple lock on guaranteed credit, we are planning to retain the link with earnings. Clearly, our aims are to reduce reliance on means-testing, which is why we are protecting the position of those receiving the contributory state pension. But we do not have the funding to uprate the guarantee credit on the same basis as the underlying state pension. Depending on how we change the system, the basic pension would be larger and protected in that way.

This order will provide support for those who have worked hard all their lives, poorer pensioners, people who are not able to work through their disabilities and those who through no fault of their own have lost their jobs and are trying to find work.

[Lord McKenzie of Luton]

I tried to avoid getting to my feet but there is an outstanding issue related to the Work Programme and the reports on that.

[Lord Freud]

My concentration has been completely broken as to that point.

[Lord McKenzie of Luton]

Because there was no impact assessment with the orders and the issues around the Work Programme, can we have an update on its performance?

[Lord Freud]

I thank the noble Lord for reminding me. Because the Work Programme is a payment-by-results system, you see the results later than with those programmes paid for on a pro forma basis. I am not sure of the exact date but I think that we are looking to publish the entrants to the programme in the next couple of months. We expect to start publishing the performance figures of the Work Programme providers in the autumn. These figures are being done to the sophisticated standards required in order to become national statistics.

Perhaps I may correct myself as regards referrals. They are expected rather sooner than in two months’ time. The first set of figures is expected this month.

[Lord McKenzie of Luton]

Are they expected in February?

[Lord Freud]

Yes, so we are expecting them reasonably soon. I can say to the noble Lord—I cannot give anything away and I have only anecdotal feedback—that I am looking forward very much to these figures. I know that he will want, as he has in the past, to say that the Work Programme was a stepping stone from some of the programmes introduced by the previous Government. I am happy with that and I think that he will want to be associated with it. I feel that I will enjoy myself when I make some of these announcements later in the year. I just want to let him know that, because it is based on my own feelings.

Despite these difficult economic times, this year’s uprating will put an additional £6.6 billion into the pockets of the poorest in our society. We have discussed the GMP increase and the amendment order to the Pensions Act 2008. I commend the order to the House.

Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Tuesday 14th February 2012 Lords Chamber

[Lord Newton of Braintree]

My Lords, I had not intended to intervene either. I will do so very briefly because I have made my points at earlier stages of the Bill. My principal point, as I said to the noble Baroness, Lady Meacher, at the end of last week, was that I did not expect to be able to vote for her amendment because, while I thought that the cause was good, writing this kind of thing into primary legislation was not. That is reinforced by the points that have just been made. I see the noble Lord, Lord Walton, nodding; I am not sure that the noble Baroness, Lady Hollis, will be nodding. The very point that the degree of disability does not directly relate to the costs incurred is actually a point of not trying to write all this stuff in concrete into primary legislation, together with the variability to which the noble Lord, Lord Walton, has referred. So I very much hope that the noble Baroness will not press her amendment to a Division, even though I strongly support the general aim that she has in mind. I want to pay my own tribute to the part that she has played in focusing on this issue.

[Lord McKenzie of Luton]

My Lords, like other noble Lords, I think we should be grateful to the noble Baroness, Lady Meacher, for keeping us focused on the issue of disabled children, and to all noble Lords who have spoken in this short debate with a great deal of expertise and knowledge on the subject. They reminded us that even in this rich country there are people and families who still live in poverty and are challenged by poverty. The deliberations that we bring to bear through legislation may seem somewhat detached from that, but that legislation has a real effect on real people’s lives.

Like my noble friend Lord Peston and the noble Baroness, Lady Howe, I was a bit confused as to how this amendment became caught up in the issue of financial privilege because I thought that the Minister was on record as saying that this was not an issue of money. Indeed, the noble Baroness, Lady Meacher, confirmed that. I did not intervene in the earlier exchanges on this issue but I am somewhat concerned about aggregate figures of costs flying around, whether we agree with them or not, and tagging on to them a provision that has no cost implication at all. If that is permitted under these arrangements, it is a bit of a slippery slope.

However, we should be grateful to the Minister for his engagement running right across the Bill, particularly on this issue, and for his promise of a review on definitions and access to the various benefits. I hope that he will take account of the point made by my noble friend Lady Hollis and others that the issue of costs does not correlate exactly with severity of disability. If I have to take issue with the Minister, I wish that he had not said that his commitment to undertake this programme was conditional on the noble Baroness withdrawing her amendment. Frankly, if it is right to do it, it is right to do it.

Perhaps I may pursue one point with the noble Lord. He previously stated that families would obtain the benefit of transitional protection so that the cash amount of support under universal credit would not reduce. That would not of course protect the position in real terms but perhaps we can at last understand a little more—on the record, I hope—about how transitional protection will work. Is it to be applied separately to the differing components of universal credit or will it be looked at in aggregate? Could an increase in the housing amount, for example, mean an effective reduction in the protected disability addition? Can we also get some clarity around changes of circumstances and what types of situation would cause the transitional protection to be removed? What about, for example, a move in accommodation that might have been caused by the underoccupation provisions that we debated previously and will debate again shortly? Could that represent a change of circumstances that could cut off that vital transitional protection?

I do not wish to go over all of our powerful debate on this issue. I acknowledge the commitments that the Minister has made but repeat that we should be thankful to the noble Baroness, Lady Meacher, for keeping us focused on this important issue.

[Lord Freud]

My Lords, many specific points have been made and I shall try to deal with them. We have debated this issue a lot and perhaps I may gently remind the noble Lord, Lord Peston, that we actually voted both ways on very similar issues. I recall that we had a plus two and a minus 16 on this issue—I think it was this issue. When we talk about the message coming from the Lords to the Commons, there were a number of votes in this area.

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[Lord Freud]

Nearly. I hope that I have made it clear that I really understand the concerns being expressed not just by the noble Baroness but right around the House. I think that our commitment to carry out this review—it is a significant review that will look at the issue properly—is the right way of approaching the matter. It is far better than adding an unnecessary and untested complication to the design of what is meant to be a universal credit system which people can instinctively understand. If it is an offer, I urge the noble Baroness to accept it and withdraw her amendment.

[Lord McKenzie of Luton]

Before the noble Lord sits down, will he write on the issue of transitional protection and changes of circumstances?

[Lord Freud]

Yes, my Lords. I am sorry; I forgot to answer that. At this stage, I am not in a position to lay out transitional protection because we are currently looking at how it will work. However, it will be a bundled up protection. The work in progress effectively involves taking someone’s existing entitlement, comparing it with their universal credit entitlement and paying the difference as a lump sum, which is then maintained. However, in the context of what we are talking about, the migration process is rather more important than the transitional protection. In the vast bulk of cases, it is when those families move on to universal credit that will matter more than transitional protection, which will be towards the tail end of this period, if at all.

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[Lord German]

My Lords, before I raise a number of issues that the Minister considered on Report, I shall just say a word about some of the conversation that there has been on behavioural change in this debate. If we pause for a moment to think of the 1.8 million people on the waiting list for social housing and the number of empty rooms, and put the two together, there is something dysfunctional about our housing sector. We have people living in overcrowded conditions who are waiting for social housing. Around 700,000 of those people fall into the vulnerable categories.

Wherever I go, the answer is always to build more homes, which is obviously part of the solution. However, for as long as there is that dysfunction and a shortage of funding and land to build more housing on—and a resistance to building more housing in some rural areas—people will continue to extend that waiting list. It is important that we do not miss the opportunity to change that dysfunction in some way. That is part of the issue that is being addressed. However, there are difficulties over the transition and how it will affect people. It is not something that is done lightly; nor is it easy to do.

There are questions that I should like to pose to the Minister. In answer to me on 14 December, at col. 1302 of Hansard, on the additional £30 million that would be used for DHPs to make up for the difficulties faced by two specific groups, he said that it would, “assist around 40,000 cases”. Is that simply a division of the amount of money available by the numbers that are predicted, or is it a fundamental assessment of those who live in adapted accommodation or are foster carers? I know that many noble Lords have made significant contributions to the debate on foster carers, both in Committee and on Report. It is of great concern because it has a very wide impact. Therefore, is the amount of money that is being made available sufficient to cope not only with the existing flow of foster carers but with the additional numbers that we need in this country to satisfy a very broad demand?

The second issue that arises from the Minister’s statement on Report relates to the other group that will be assisted by the discretionary housing payments—disabled people who have significantly adapted accommodation. I recall that in Committee we talked about several examples of people who had had very expensive changes made to their accommodation at public expense. That public expense would be duplicated if they had to move to other accommodation. Will the Minister explain to the House what “significantly adapted accommodation” is? Is the definition to do with whether it would not be cash-worthwhile, or does it go beyond that and relate to the nature of the adaptation that has been made?

One issue relates to equipment. Some equipment for disability is very cumbersome, large and bulky and would not warrant being moved. It would probably have been built into accommodation. For example, does this apply to a home where a disabled person requires ground-floor accommodation and where the expense of building a ground-floor extension to a property means that there is an empty bedroom upstairs? Will we still require that sort of change?

This whole transition, which must be effected through regulations, will undoubtedly be the source of some detailed conversations about these matters. Therefore, will the Minister give us some indication of whether the DHP that will be applied will be sufficient to tackle the two specific groups in all circumstances; and what he expects to be able to afford to do in the transitional arrangements that he may bring forward in regulations?

[Lord McKenzie of Luton]

My Lords, the Government have moved in a number of ways on the issues that have been returned from the other place. Along the way, they have also accepted a number of other changes that were pressed on them by your Lordships’ House. However, the Bill remains unchanged in some of its most unacceptable provisions, not least of which are those relating to underoccupancy. That is why we support the amendment in lieu, which was moved with such precision and expertise by the noble Lord, Lord Best. As we have heard, the amendment is less ambitious than that previously accepted on Report, reflecting our obligation to take account of the financial strictures of the Government. However, the amendment is not cost-free and cannot be if it is to provide protection for hundreds of thousands of households that, on average, could see their income fall by £14 a week.

It is clear that, under the guise of addressing underoccupation, the Government seek to make further savings on housing benefit on top of the multiplicity of restrictions—the CPI uprating, the 30 per cent percentile, the rent and size caps and the shared-room rate—that are already in play. Savings from some of these are being made in parallel with the benefit cap. The Government’s stated aims for the underoccupation rules are to encourage greater mobility within the social rented sector; to make better use of the available social housing stock; to improve work incentives; and to curtail housing benefit expenditure. The amendment in lieu addresses each of these issues. It is clear that, should a suitable offer of accommodation be forthcoming, there is an expectation that an underoccupying tenant should take it up, whether or not they have only one spare bedroom or fall into any of the exemption categories listed. If they did not, the housing benefit reduction would ensue. What is suitable would have to be defined in regulations and would have to reflect the circumstances of the household, including its need for adapted property, transport links, access to support services and appropriate schooling.

However, there is no merit at all in an economic incentive to move to smaller properties when there are no smaller properties to which people can move. Therefore, the amendment provides that, with no suitable alternative offer, the underoccupation deductions—the room tax, in the terms of the noble Lord, Lord Best—would apply unless there was no more than one spare bedroom and one or more of the other exemption criteria applied. As for improving work incentives, this can surely have no application for those who have no work requirement placed upon them, for example because of a severe disability. These are people who the Government themselves recognise cannot work and should not be expected to work, so what is the purpose of an economic work incentive for them?

We know that disabled people face extra costs in their daily lives and that it is harder for them to take the hit of reduced housing benefit. Indeed, the Government have already recognised this in the benefit cap by exempting certain categories of individuals from loss of housing benefit or universal credit. These are the self same categories listed in paragraph (b) in the amendment, mainly those on DLA or PIP. War widows or war widowers are similarly included in the exemption to parallel the arrangements in the benefit cap—no more, no less. The noble Lord, Lord Best, referred to the sources of funding on offer to deal with foster caring. It is hoped that the Minister will be able to dispel any suggestion that the new money to which he referred is just being cynically recycled. The Government’s other solution is for people to take in paying lodgers. Perhaps the Minister can say what assessment has been made of this possibility.

We agree that underoccupation in the social housing sector should be addressed and clearly the lack of social housing and the need to build more is part of that, but it is clear that the Government do not see these provisions as a route to doing so. Their assumption is that most people will not move and will take the hit and that is how the Government will get their savings. These amendments would stop them getting those savings from the most disadvantaged in our country. We support them.

[Lord Freud]

My Lords, the amendment in lieu of the noble Lord, Lord Best, seeks to exempt certain categories where the tenant underoccupies by one bedroom and no suitable alternative accommodation is available, those not required to seek work, carers, disabled people, war widows and foster carers. Our estimate of the cost of this amendment is slightly lower than that of the noble Lord. He suggested that it was £150 million. We estimate that it would cost up to around £100 million in 2013-14. We have already announced an increase of £30 million in the discretionary housing payments aimed at some of these categories—those living in adapted properties and foster carers. Others in vulnerable situations can also apply to the fund where they have difficulty meeting the shortfall.

I say to my noble friend Lord Kirkwood that that £30 million is an ongoing rate. The amount will be kept under review to see whether it is meeting the level of demand in different areas. We set the amount at £30 million based on the numbers likely to be affected by the measures. We think that the £30 million could help about 40,000 cases based on the average reduction of £14 a week. That figure is based on the group of 35,000 potentially affected claimants who are wheelchair users and live in accommodation that has been adapted to suit their needs, although, of course, not all of these would need to apply for a discretionary housing payment. We estimate that around 5,000 foster carers, including those in between assignments, could be affected by the measure.

My noble friend Lord German referred to the type of housing that would be affected by the measure. We decided to tackle this matter through discretionary housing payments, as introducing exemptions and classification is very difficult in practice. Therefore, we are leaving it to local authorities to make some very tough judgments on where it makes sense to offer that support as they have a lot of local knowledge. Regrettably, £100 million is a lot of money in the present climate, even though it is less than the £150 million figure estimated by the noble Lord, Lord Best. Clearly, it is difficult to agree amendments and send them to another place when they have such significant costs attached to them.

In summary, we believe it is right and fair to proceed with the measure as it is in the Bill. We will apply a percentage reduction of 14 per cent for those underoccupying by one bedroom and 25 per cent for those underoccupying by two or more bedrooms. That comes in in April 2013. The noble Lord, Lord McKenzie, asked me to disavow any cynical recycling. I am in a position to do that, as we announced a range of these reductions of between 10 and 15 per cent for one room and 20 to 25 per cent for two rooms. When I fixed the rates in December, I was able to do that within the bands that we had set.

[Lord McKenzie of Luton]

Is the noble Lord saying that those rates would be lower if the £30 million had not been made available?

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Moved by

[Lord McKenzie of Luton]

As an amendment to Motion E, leave out from “17A” to the end and insert “and do not agree with the Commons in their Amendment 19A but do propose Amendments 17B, 17C, 17D and 19B as amendments in lieu of Amendments 17 and 19A”

17B: Page 36, line 19, leave out “365 days” and insert “the relevant maximum number of days”

--- Later in debate ---

19B: Line 4, leave out “a prescribed number of days which must be at least 730” and insert—
“(a) 365 days, or
(b) if the Secretary of State by order specifies a greater number of days, that number of days.”

[Lord McKenzie of Luton]

My Lords, Amendments 17B, 17C, 17D and 19B relate to the time limit for the contributory employment and support allowance, and recommend that this can be increased by secondary legislation in the future.

The time-limiting of contributory ESA to just 365 days for those in the work-related activity group is one of the most indefensible provisions in the Bill. It is all about saving money and will bring what my right honourable friend Stephen Timms referred to in the other place as,

“a financial catastrophe for a very large number of people”.—[Official Report, Commons, 1/2/12; col. 836.]

I remind noble Lords that the number affected will rise by 2015-16 to something like 700,000, 40 per cent of whom will not be entitled to income-related ESA. It will hit some 100,000 claimants in a matter of a few weeks when they see their ESA disappear literally overnight, with losses in income of up to £90 a week and over half of those affected in the lowest three income deciles. The very manner in which this is being introduced, including the assessment period and time already on the clock, demonstrates that this is not about fairness but about money.

The arguments against this one-year limitation have been well rehearsed and I do not propose to develop them in detail again this evening. They were subject to a powerful amendment moved by the noble Lord, Lord Patel, on Report. The restriction has no credible evidence base, it undermines the contributory principle, it creates another couple penalty, and it simply fails to take proper account of the time that many will need to overcome their illness or disability so as to be able to access employment. The policy potentially overrides the WRAG conditionality, and the noble Lord, Lord Patel, is rightly pursuing the situation for cancer sufferers. We look forward to supporting him in his endeavours shortly.

Noble Lords sent a strong message to the House of Commons seeking a minimum of two years for the restriction, and for the restriction to be embodied in secondary legislation so that an evidence base could be brought to bear. That message fell on stony ground and the Government have brought the shutters down on our original amendment by claiming financial privilege. Of course, they did this with the full support of the Lib Dems, despite their party policy to oppose arbitrary time limits, but this is a reality that we have to face, if not forget.

In proposing this amendment in lieu, we do not abandon our determination to see this policy based on evidence; nor do we accept the 365-day arbitrary limit. Securing that an upward revision of this limit can be achieved by secondary legislation at least keeps the cause alive. The Minister has claimed international precedents—as he did a moment ago—as part of the evidence base for this policy. Perhaps we can ask the DWP to publish that research so we can share the benefit of it.

Nevertheless, I have some expectation that the Minister will feel able to accept this amendment and I thank him for his consideration if this is the case. For us, this is not the end of the issue.

[Lord Freud]

My Lords, Amendments 17B, 17C, 17D and 19B, tabled by the noble Lord, Lord McKenzie, mean that although a time limit of 365 days will still be applied to contributory ESA claimants in the WRAG, including those claiming under the youth provision, there would also be an order-making power that would allow the number of days to be increased in the future.

I thank the noble Lord, Lord McKenzie, for his amendment as this has given me the opportunity to consider again an order-making power for time-limiting. We have discussed at length our rationale for setting the time limit at 365 days. We have listened carefully to noble Lords’ concerns about this time limit. We have always said that, for clarity, we believe it is right to have the number of days specified in the Bill and that the time limit should not be subject to secondary legislation.

However, this amendment achieves an excellent balance of the two. A time limit of 365 days is still specified in the Bill, but with the added flexibility to increase the number of days by order. We welcome this amendment and I commend the noble Lord, Lord McKenzie, for tabling it.

To sum up, we have listened to the concerns raised by noble Lords and have made amendments to ensure that disabled people whose condition deteriorates are able to re-qualify for contributory ESA if they would be placed in the support group. This demonstrates our continued commitment to supporting those with the most severe health conditions or disabilities.

The noble Lord, Lord McKenzie, has tabled very well considered amendments, so I urge noble Lords to accept them. However, I need to make clear that accepting these amendments in no way changes the Government’s policy on the time-limiting of contributory ESA. The limit will remain 365 days. These amendments simply mean that a future Government—of any hue—would be able to change the limit by order, as well as by further legislation.

[Lord McKenzie of Luton]

My Lords, I am very grateful to the Minister for his acceptance of those amendments. He helped to draft them so he should accept them! I hear what he says about the Government sticking to their 365-day limit, but we will continue to work on him and his colleagues and hope to change their minds before we have a next Government.

Motion E1, as an amendment to Motion E, agreed.

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[Lord Patel]

My Lords, it is true that some cancer patients may not need any treatment after surgery. But many others need therapy and my amendment refers particularly to those who cannot work because of their treatment or their suffering from the effects of the treatment. My key point is that those people want to work. As Jenni Russell said in her article, they are not skiving. They want to work. If the amendment is defective in that area, the purpose is not.

[Lord McKenzie of Luton]

My Lords, when our amendments were considered in the other place, the Minister, Chris Grayling, emphasised that the scope of the support group had been increased for cancer patients and that the consultation, following work with Macmillan Cancer Support and Professor Harrington, carried a presumption that someone with cancer will be in the support group. In an exchange with my right honourable friend Stephen Timms, the Minister also confirmed that it was planned to have a simple system that enables a medical professional to indicate whether someone has sufficiently recovered to make a return to work. That obviously is to be welcomed. It clearly goes with the grain of the amendment in lieu in the name of the noble Lord, Lord Patel, which has our support. He has set out the arguments clearly and the support of noble Lords would bring relief to up to 7,000 people who have or have had cancer.

We recognise that the Minister cannot pre-empt a consultation, but we hope that the Government can accept the thrust of what the noble Lord, Lord Patel, proposes. If he cannot, we hope that the noble Lord will test the opinion of the House. Bringing relief to some 7,000 cancer sufferers is a worthy endeavour. Of course, it does not of itself provide help to the hundreds of thousands who are adversely affected by the arbitrary time limit in contributory ESA but that should not prevent us bringing some relief to this group where that is possible.

[Lord Phillips of Sudbury]

Did the noble Lord say that this would apply to 7,000 people?

[Lord McKenzie of Luton]

I understand that 7,000 is the figure. The noble Lord, Lord Patel, is nodding in assent.

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Moved by

[Lord McKenzie of Luton]

As an amendment to Motion G, at end insert “but do propose Amendment 47B as an amendment in lieu”

47B: Page 62, line 40, at end insert—
“( ) Regulations under this section shall provide that the benefit cap shall not be applied in prescribed circumstances, for the first 39 weeks from the relevant date.
( ) Such prescribed circumstances shall include—
(a) a claimant leaving work as a result of being made redundant or becoming disabled; and
(b) the requirement for the claimant to have been in work for a prescribed period prior to the relevant date.
( ) The relevant date is the date from which a claimant is treated as not being in work for the purposes of this section.”

[Lord McKenzie of Luton]

My Lords, I shall speak also to the amendments in Motion G2.

I accept absolutely the Minister’s assurance that he would have no part in seeking to demonise people on benefits. I have never thought that of him and I think that we would all accept that to be the position. In moving Amendment 47B in lieu, I should welcome the improvements to the working of the benefit cap which the Government announced in another place. While they might protest otherwise, it is clear that they recognise some of the unacceptable consequences of the cap which they are now seeking to ameliorate. This amendment goes with the grain of the Government’s thinking and announcements, and provides an opportunity clearly to embody that recognition in the Bill before it goes on its final journey. It sits alongside our further amendment which focuses on how the cap might anyway be constructed.

The amendment encompasses the concept of a period of grace of nine months before the cap bites for somebody who has become unemployed and it enables the detail to be set by regulation, which will enable the Government to specify their announced requirement of 12 prior months of work for the grace period to run.

When debating this exemption in the other place on 1 February, the Minister, Chris Grayling, also announced further exemptions in the ESA support group which the noble Lord, Lord Freud, confirmed a moment ago. These exemptions add to the existing list, which includes those in receipt of DLA, PIP, attendance allowance and, as we have heard, a war pension for surviving dependants when that is in payment. Further, we know that non-cash benefits such as free school meals, council tax benefit in its localised form and the childcare element of universal credit are to be ignored in what is included in the total benefits for the purposes of the comparison with average earnings—perhaps the Minister will confirm that to be the case.

Moreover, again as we have just heard, there is the announcement of more money, £160 million in total, for the first two years to top up discretionary housing payments to help those facing particular challenges. Whether this will be enough remains to be seen. So far as it goes, it is all well and good, although having lectured us on there being no money, perhaps the Minister can tell us where this funding has come from. Is it new money, or has something else been cut and, if so, what?

The cap will still hit tens of thousands of families hard, but the issue of who is in and who is out, and what is in the calculation, is at least a little porous under what the Government now propose. When announcing the period of grace, the Minister in the other place stated that it was always his intention to introduce this measure. One can only conclude that he went to some effort to disguise it. It did not appear in the impact assessment, including the updated document of 23 January. Indeed, on the basis of a response to an amendment tabled on Report by the noble Lord, Lord Best, pressed also by my noble friend Lady Drake, it seemed to be far from certain that a period of grace would be accepted. The Minister said then:

“What I can say today, as I said in Grand Committee, is that we are well aware of the issues, we are confident that we have the powers we need to ease transitions and we will consider the case for a grace period along with the other options that might be available”.—[Official Report, 23/1/12; col. 892.]

One reason for highlighting this issue in this way is to get on the record how the grace period is to operate. It is understood that if somebody becomes unemployed after or at the time that the benefit cap comes in, the nine-month period will run. I think that the Minister has now confirmed that the period will run also if somebody loses their job before the introduction of the cap, so somebody being made redundant in September this year will still get the benefit of three months’ easement from the cap until June 2013.

Moreover, can the Minister confirm that the period of grace will operate when somebody has their hours reduced so that they fall below the threshold for the number of hours necessary to be considered in work and thus falling within the scope of the cap? Can he also confirm that, for so long as the prior-employment requirement is met, an individual may benefit from the period of grace more than once? What is the position where a couple claims universal credit? Will just one of the joint claimants have to satisfy the conditions for the period of grace to operate? What assumptions underpin the estimate that the period of grace will reduce savings by £30 million? I should make it clear that we support and have argued for a period of grace, and the amendment seeks clarification as to how it will work in practice. We are pleased that it will help to ameliorate the misery that the cap will bring and we want the period of grace to be meaningful and not just a gesture to get the Lib Dems on board.

I turn to Motion G2. We support a benefit cap but do not consider the manner in which it is to be introduced by the Government to be sensible. As we did in the other place, we take the opportunity to set down our view of how a cap could operate. Our amendments approach the benefit cap in a different way. It is different because of the difficulty in particular in seeking to create a one-size-fits-all cap which could lead to at least 20,000 families becoming homeless, wiping out any of the £270 million savings that the Government have said their benefit will produce. Indeed, it would lead to the very consequences which the Government have had to recognise in providing the additional £160 million of funding announced on 1 February—which we have just discussed. They are the sort of consequences which the Government have recognised in a series of exclusions for individuals and exemptions for certain types of benefit from the calculation.

The concept of a cap might be superficially very straightforward and, indeed, attractive: no household should get more in total benefits than the average net-of-tax-and-national-insurance earnings of those in work. A nice round sum of £500 a week for some might seem generous given that, for many, it is more than a family has to live on.

We risk creating the impression that everyone on benefits is getting £26,000 a year; and, by dealing in generalities, we risk ignoring the differing circumstances that families face. Although only 1 per cent of benefit claimants may be caught by the cap, this still amounts to some 67,000 families. The sum of £500 a week might get you a one-bedroom apartment in London, but in Rotherham in Yorkshire it would get a six-bedroom, detached family house. Given that the largest single benefit received by those set to be affected by the cap is housing benefit, one cap, set nationally, cannot be fair. This is particularly—but not exclusively—a London phenomenon, as illustrated by the Government’s own impact assessment. Over half of those affected by the cap currently live in London, with 3,300 in Brent alone set to lose under the cap, so it is no wonder that Lib Dem MPs reputedly went walkabout when the vote came up in the Commons. We believe that our amendment in lieu offers a better way forward. The cap should recognise different housing costs, especially in London. As noble Lords will know, recognising different housing costs has been a localised part of the benefits system for over 70 years.

Moreover, if a benefit cap is to become part of the benefits landscape, there is a case for appointing an independent body to advise on what the appropriate levels for the cap should be. The benefit cap is—or has certainly become—an emotive issue, but it would be bad policy if the structure of the benefit system were driven by public sentiment rather than evidence and analysis. A requirement for an independent body to have regard to safeguarding against homelessness should not be contentions. It is what the Government have just done in pumping £160 million into the system and would help avoid local authorities racking up millions of pounds of costs at a time of austerity. However, it does not mean that somebody should never move, nor does it give anyone licence to occupy the extravagant, upmarket properties so beloved of the media. Neither should this approach negate the Government’s belief that part of the rationale for a cap is to change attitudes. Having regard to child poverty targets is not just about income transfers, it is about a range of building blocks, including accessing the workplace, for those who can.

We seek to support a cap that better reflects reality than that promulgated by the Government. We are of course dealing with some of the most vulnerable families in our country and we owe it to them to construct policies that are not driven by short-term political expediency. I beg to move.

--- Later in debate ---

[Lord Freud]

My Lords, in my opening remarks I described the measures that the Government are putting in place to ensure that the cap operates fairly. I explained that the exemption of people in the ESA support group ensures that the cap affects only people who, taking account of their health and any disability, can reasonably be expected to do work or work-related activity. I explained that the nine-month grace period will ensure that those who have been in work for 12 months or more will have time to find alternative employment or consider alternative options before the cap applies.

I have been asked a series of questions and I shall try to deal with them rapidly. On the question where the money is coming from, I think we shall leave that to the Budget.

Where one member of a couple satisfies the criteria for the grace period, yes, it will apply. The grace period will apply where either member of the couple meets the criteria.

I was asked which payments would be ignored. The noble Lord, Lord McKenzie, went through what I said in Committee and I do not think there is any reason to change any of that. We have to work out the exact nature of the work exemption but, in principle, I see no reason why the grace period should not apply when hours are reduced.

The question of the noble Baroness, Lady Drake, is so detailed that we need to wait for the regulations. That is a very good reason not to put some of this stuff in primary legislation.

An important point was raised by my noble friend Lord Kirkwood about monitoring people. We will monitor these cases very closely and keep track of their destinations. We already know who they are and will engage proactively with them from now on.

The right reverend Prelate the Bishop of Ripon and Leeds and the noble and learned Baroness, Lady Butler-Sloss, raised a question about kinship carers. In practice, the grace period is particularly helpful for kinship carers. We have the conditionality issues. Having this £80 million on a discretionary basis means that we can target those families of exactly the kind that will need such support. Therefore, the way that we have done it is rather more satisfactory in that area.

The right reverend Prelate raised the question of what a benefits system is for. We are constructing the universal credit to make a modern benefits system that does what we need it to do. He can take that as read.

Amazingly, I think I might have answered all the questions. The right reverend Prelate mentioned sweetness and light in relation to Motion G1. Fundamentally, I think that there is sweetness and light. I hope so, in that we are providing a grace period through regulations. We have all the powers that we need to do it, so in practice this amendment is unnecessary. It is sweetness and light in that sense and I hope the Motion will be withdrawn.

To be absolutely honest, there is less sweetness and light over Motion G2. I am resisting having some political knockabout on this. I know that it is not proper in this Chamber; let us leave that to another place. However, I find it very hard to think about having regional limits set by a new quango. My noble friend Lord Newton and the noble Lord, Lord Empey, have made the point that this could be very confusing and complex. If the noble Lord were sitting on my side of the Table at some future point, I would give him some advice: “You don’t want to do this”. Looking at it with a slightly stricter hat on, if we were to vote the Motion through it would mess up and delay the application of the cap. We are talking there about real money. We simply could not make the saving of £200 million a year because it would be such a complicated thing to introduce. Therefore, I hope that Motion G2 will be withdrawn. My mouth will be open if it is not.

There is an important principle in this debate. It is not fair that families on benefits receive more than the average working family. It is not fair to taxpayers. Indeed, it is not fair to benefit recipients who are trapped in a cycle of welfare dependency. Therefore, I urge the noble Lord not to press either Motion G1 or Motion G2.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his detailed responses, as ever. It is all sweetness and light as far as Motion G1 is concerned. It was tabled to get the very detailed answers that we got from the Minister and I thank him for that. I thank all other noble Lords who have participated in this debate. It is always good to hear from the right reverend Prelate the Bishop of Ripon and Leeds, who brings us back to issues of homelessness and vulnerable people. It is all too easy for us to forget about them in this environment.

The noble Lord, Lord Kirkwood, expressed his view that he was less than pleased with the benefit cap. I am well aware that he is not alone in that view. Interestingly, he referred to the cap as a sticking plaster. There is an interesting issue over whether the Government see it as a continuing part of the benefit system. We took it that they did, which is why we made some of our proposals, but maybe it is just a short-term measure.

I thank my noble friend Lady Drake for her support. The noble Lord, Lord Newton, asked about how local we would get in all this. Fundamentally, Motion G2 tries to highlight that rent is the big issue in all this. There are big disparities, particularly the London phenomenon, and rent will never be equalised across the country. I see and understand the potential risks in that, to which the noble Lord, Lord Empey, and others, including the Minister, referred. However, the intent is to focus on rents and that huge disparity. In the instance that I cited, the disparity is so big that how you make one cap fit all on an ongoing basis, without having to pile in more money every year to deal with the effects, is a real issue. The Government will have to face that in the months to come.

However, I should make clear that it is not my intention to press the amendments in Motion G1. On Motion G2, I am bound to say that my colleagues in the other place were denied the opportunity to vote on this. Therefore, I intend to test the opinion of the House.

Motion G1, as an amendment to Motion G, withdrawn.

Moved by

[Lord McKenzie of Luton]

As an amendment to Motion G, at end insert “but do propose Amendments 47C to 47H as amendments in lieu”

47C: Page 62, line 40, at end insert—
“( ) Regulations may provide for the benefit cap to be applied to the welfare benefits to which a single person or a couple is entitled according to the local area in which they are ordinarily resident.”

--- Later in debate ---

47H: Clause 94, page 63, line 37, after “year” insert “refer to the Independent Body on the Benefit Cap for”

[Lord McKenzie of Luton]

I beg to move.

--- Later in debate ---

[Lord Freud]

My Lords, clearly I am very aware of the strength of feeling that has featured in previous debates on child maintenance, and I look forward to hearing the views of noble Lords today.

Perhaps I may start from a rather different position from the one I took in the debate when we last looked at this issue. I shall quote the right honourable Frank Field, who is an acknowledged expert in this area. Even though he sits on a different side, he makes a point that is absolutely smack-on. He said:

“Is not the really big change that we are discussing the fact that when the CSA was first established, the maintenance moneys went to the Treasury to offset what taxpayers were putting up because, generally speaking, fathers were not prepared to do so, whereas now that money remains with the family? Is it not reasonable, in such circumstances, if people are going to get a top-up to their benefit that they should contribute to the cost of gaining that extra money? On the timing, should we not charge people once they are getting the money, not before?”.—[Official Report, Commons, 1/2/12; col. 910.]

That quote highlights the central point to the debate. We need to look at the proposed charges in the context of all the other financial support that the Government provide for lone parents. Child maintenance is only one aspect of that support.

I have made some rough calculations to give noble Lords a sense of the relative orders of magnitude involved. In the 12 months to December 2011, the CSA collected or arranged maintenance of more than £1 billion. However, by far the largest amount of money going from the Government to support lone parents is through the benefits and tax credits systems. The benefits system provides well over £5 billion of support to lone parents, and the Government provide more than £10 billion of further support through tax credits. Thereby, the total support going to lone parents—a few lone parents are bereaved but the bulk, 95 per cent, are not—in either direct state funding or with funds from state mechanisms is well over £16 billion.

Let us now look at the other end of the telescope. What are we asking the parent with care to pay for collecting that extra money? By the end of the next spending review we will collect each year between £50 million and £100 million in collection charges from parents with care. Those figures are based on the 7 per cent to 12 per cent range of collection charges set out in the Green Paper.

Let us take the figure of £75 million and compare it to the £16 billion of support that is being provided to this group, either directly or through the state. That ratio works out at less than one half of one per cent. I do not think that Barclaycard or other credit cards charge as little as that.

[Lord McKenzie of Luton]

To clarify the figures, is the £16 billion to which the noble Lord refers payable just to parents with care who are using the statutory CSA system, or to lone parents generally?

[Lord Freud]

This is paid over to lone parents as a group. That is what we are paying over to lone parents. Some of them have been bereaved, but the bulk of them have not. All of them could look to get support from the non-resident parent, whether or not they had lived with them at one stage. That is the figure I am trying to explain. All of them could look to get some maintenance.

Is it unfair or unreasonable to ask for a small contribution to the cost of running a child maintenance system against a backdrop of that financial support? I remind noble Lords that, as Frank Field said, there is no offset any more; it is money on top; it is disregarded. A lot of the debate we had when CSA started in the 1990s and was so controversial, and in the early 2000s, was framed by the concept that it was money going from the non-resident to the Treasury. Between 2000 and 2010, we moved to a 100 per cent disregard. That is the fundamental difference of which I remind noble Lords.

The next point is that we have committed to reviewing the charging powers and laying the review before Parliament 30 months after introduction. That is to ensure that we are able to test properly whether the intended incentive effects of the charges are realised and that we get the behavioural impact of the charging regime.

Again, simply, we are looking at a 1:2 charging regime in round terms, which is intended to incentivise both sides to reach agreement between them rather than going through the state system as the first option. One reason that it is so important that we encourage both sides to go independently is because research tells us that the children are better off if the parents can agree between them rather than using the state system.

I, and the Government, have the utmost respect for my noble and learned friend, Lord Mackay, and the intention behind the original amendment laid on charging for child maintenance services. The problem of asking for a test to establish when the parent with care has gone through a process is that it may not be a real test—anyone can say, “Yes, I have been through a process”. If that is the case, we will end up with everyone using the system as the first option. If it is a real test, we will have to go through all the work of checking whether they have made efforts and the rights and wrongs, and we will be pulled down the slippery slope that we are so keen to avoid. Because we would be pulling people into the system, that would have a substantial cost because of the pure volumes.

Charging must have a role in the new system to ensure that we do not repeat the failings of the CSA. The proposed charges create an incentive for parents to collaborate and take responsibility.

As a direct result of the concerns expressed in this House, we have also changed the fees to enter the system, to avoid the parent with care being deterred from using the state system. We have announced that we are reducing the maximum charge from £100 to £20 across the piece to ensure that it is not a potential barrier to entry. We are offering a very good service for that £20 in that we will be looking at the non-resident parent’s earnings, and that will be a real benefit for the parent with care.

With regard to reducing the maximum charge and completing the review, when we know how the system has shaken out we can ask whether we have got the figures right and whether the charges are right. That is the point of the review: we can ask whether we are getting the behavioural responses that we need. I hope that I have laid out the issues adequately. I beg to move.

--- Later in debate ---

[Lord Kirkwood of Kirkhope]

My Lords, I am sure that is for the convenience of the House and I am grateful to my noble friend for making that clear. I could see the long faces on some of my Scottish colleagues getting longer by the moment. It is only fair to them that I apologise to them, because I have an interest in the Scotland Bill as well. However, I am sure it will wait until next Tuesday.

At this time of night I want to make a suggestion rather than a speech. Before I do that, I will say that I agree with the analysis of the noble Baroness, Lady Sherlock, about the money. I was a little dismayed at the way my noble friend opened this debate, because dealing with quantums of money and global amounts does not make an awful lot of sense unless there is some context. I much prefer to look at percentage shares of the benefit spend over time, and look at trends, rather than global amounts, because they sound like colossal sums of money. I agree with the noble Baroness on that point. It does not help the debate, because any of us who have been studying these things know that many single parents struggle on low incomes.

That point has been made and I will not pursue it, but I want also to make clear that in terms of the budget impact—which we have seen and which was referred to a moment ago—only 20 per cent of the cuts have attached themselves to household domestic spending and income. That will get worse. The Institute for Fiscal Studies, which has been quoted, has done some valuable modelling work that suggests there is going to be downward pressure on household incomes in single-parent families in future. That has to be borne in mind. Indeed, the Government’s own impact assessment on the ultimate rollout of universal credit from 2013, as I read it, shows that 500,000 working single-parent households will have a lower entitlement under universal credit. It is wrong to say that we are dealing with a category of rich people. There is a mixture, which I want to come on to in a minute in the main question I want to ask.

I have always been against charging. I was against it when the noble Lord, Lord McKenzie, was considering it. Along with the noble Lord, Lord Skelmersdale, we spent many a happy hour trying to resist charging, simply on the basis that it is a disincentive. I still believe that is likely to be the case. All developed western European nations now have various iterations of state-sponsored collection and enforcement services. We should—and will—have a new one, and one that will actually be cheaper as we will be using HMRC data. As my noble friend said, the service will be better and more efficient. There will be annual reviews and the data will be cleaned up as people are asked to come off the existing system and reapply—although that will be a much bigger undertaking than I think people imagine, and I hope that the department is prepared for that. However, it will be a cheaper and better service—£93 million cheaper, if my memory serves in respect of the impact assessment statement and other bits of information. It is important that we cherish the role that it plays and the impact that it has on lower-income families.

Looking at the figures, there are two dimensions to this—the low-income one and the high-income one. I remember an exchange when we last discussed this and have been reflecting on it since. The Government’s position is absolutely arguable for those who have an income of £50 or more per week via Child Support Agency maintenance. Twenty-two per cent of the case load gets 50 per cent or more, per week, of the maintenance delivered through the CSA. That is a big amount of money and gives us some options. Those kinds of families and households have much more flexibility in terms of options and choices. In those circumstances, it is perfectly reasonable to try to affect behaviour. The point I want to make is that 40 per cent of single parents receiving maintenance via the CSA receive less than £10 per week.

It is that category of transfer payment recipients that I am really concerned about. They do not have any options; they are in a very difficult place. The Government’s attempt to get behavioural change is much harder to argue reasonably in that context. I support the amendment of the noble and learned Baroness, Lady Butler-Sloss, but if we are stuck with charges and are reviewing them in 13 months’ time, would the Minister look urgently and robustly at the case for variation in the charges? If somebody is getting £10 per week, 12 per cent of that is quite a load of cash. If there were some way of getting the £75 million that the Government believe they need to fund the system going forward from fees, then they could do that by taking a little bit more out of households and families with a better take and a better return from the CSA than those who are at the bottom of the income distribution pile. If some thought could be given to that—and it is a bit of an ask at this time of night to get a reaction to that idea without notice—or even if the Minister were prepared to say that he would take it away and consider it in the course of the review, I would be happier about the results of the debate. If the noble and learned Baroness is thinking of taking her case to a vote—and that would also be a difficult ask at this time of night—her case has merit and I would support it. If we are stuck with charges, however, we should be looking at variations to try to cushion the effects on some of the low-income households that I think will suffer as a result of the imposition of these charges as currently cast.

[Lord McKenzie of Luton]

My Lords, I shall be brief. I agree with pretty much everything my noble friend Lady Sherlock said about the proposed charging arrangements. We certainly support the amendment of the noble and learned Baroness, Lady Butler-Sloss, because it does the right thing. It is dealing with those people who have no choice but to use the statutory system and cannot now use maintenance direct of their own will, because that depends on the non-resident parent applying to use it and on compliance by the non-resident parent. They have no other choice, and it is therefore wrong that they have to suffer a collection charge.

Will the Minister confirm—in respect of the reduced application fee of £20, which is welcome—that it is not going to be recycled to produce increased collection charges from mothers as well? It is important that we have clarity on that. To the noble Lord, Lord Newton, I would say that we will be in touch with our honourable friend Anne McGuire and tell her that she has misunderstood you. I am sure she would welcome that. The noble Lord, Lord Higgins, said that he thought the amendment of the noble Lord, Lord Boswell, had no cost. If that were right, I would be very worried about it because it presumably means that it is not going to affect the proposed arrangements, and I would not agree with that.

I say to the noble Lord, Lord Boswell, that I am disappointed in a sense with the proposition before us. I understand it is done with good intentions; I accept that because I know his commitment to these issues. However, if at the end of the day that is what is on the table, then that is what we would go with.

I say to the Minister that I do not think it was helpful to have some of those early statistics. Comparing the figure of £16 billion, which I understand is benefits and tax credits paid to all lone parents, with the fees that might be derived by those who use the statutory system of CSA is a nonsense idea. It does not make any sense at all. It is almost as though the assumption was that maintenance was money provided by the state. Maintenance is money that flows from non-resident parents—and we hope in increasing amounts in the future—to the parent with care. It is their money, not money provided by the state. So we probably have limited choices before us tonight. I hope the noble Baroness will feel able to press her amendment, but understand if she does not. If she does not, with a degree of reluctance I think we would support what is on the table from the noble Lord, Lord Boswell. Looking at it, though, I am not sure that it actually achieves anything that cannot be achieved from the existing framework of regulations. If it does, perhaps the Minister can tell us, but if we did not have that amendment, I am not sure that anything the noble Lord seeks to do under it could not be done anyway under the 2008 Act.

--- Later in debate ---

[Lord Freud]

My Lords, I shall start by addressing Amendment 73C, tabled by the noble and learned Baroness, Lady Butler-Sloss, which relates to limiting collection charges for parents with care. This is a substantial amendment that is similar to my noble and learned friend Lord Mackay’s, and it would represent a similarly substantial level of cost.

Before I get into the figures—I know that my figures have not been popular today—I want to highlight an element of the proposed charges that I do not think we have conveyed with sufficient clarity to noble Lords: parents have the option of avoiding collection charges altogether by using maintenance direct. My noble friend Lord Boswell asked a series of questions on this.

[Lord McKenzie of Luton]

Is it not right that under the new proposals the non-resident parent makes the decision to use maintenance direct but that is no longer available to the parent with care? The parent with care cannot opt for that arrangement.

[Lord Freud]

I think it is clear that the way that maintenance direct works is that the two parents have to agree on it. That is the point of maintenance direct. Under that system the Government calculate how much child maintenance is payable, but the payments themselves are made directly by the non-resident parent to the parent with care. If the payments are made in that way, no collection charges apply. It is a mutual decision.

The Government will ensure that a service is provided that enables maintenance direct to be used without the need for any contact to be made or personal information to be divulged. By using this system, the parent with care has the security of knowing that where it is established that payment has not been made in full and on time by the non-resident parent, the case will be moved into the collection service and swift action can be taken to reinstate payments. They can switch back and forth into that system. I take my noble friend’s point that there is a lot of attraction in that system and it may be underpublicised. To the extent that it is, we need to do something about it.

Where the payments move back into the collection service, charges will then be imposed for its use and they are heavily weighted on the non-resident parent. That acts as a real incentive for non-resident parents to pay in full and on time, and indeed by the charge-free method of maintenance direct. On the question of some non-residents wanting to go on punishing their ex, the parent with care, that would be a very expensive way of doing it—it costs the non-resident roughly twice as much as it does the resident.

I want to come back to the noble Baroness, Lady Sherlock, who said that she would deal with my argument piece by piece. I did not particularly agree with her. I was adding up the benefits system but also the tax credits system, which presumably many of the others who were not on the benefits system would have been on. Tax credits were invented in the early 2000s. I am talking about what it was like in the 1990s. The process by which the state supplied money for lone parents grew gradually through the 2000s until there was a total disregard. Early on, that was in the form of tax credits. From 2008, a proportion was in the form of benefits. The full disregard came in 2010. Therefore, I do not particularly buy the dismantling of the noble Baroness, Lady Sherlock.

I want to go into the costs. We estimate that the cost of Amendment 73C would be around £190 million, although it would depend on the exact level of the collection charge. There are assumptions around that. Therefore, in response to the question of my noble friend Lord Higgins, I say that it would be only a little less than the cost of the original amendment tabled by my noble and learned friend Lord Mackay, which was £220 million.

I also acknowledge the serious and considered concerns that have been set out by noble Lords both today and in our previous debate on this. I am prepared to make some specific commitments to the House on the development and oversight of the regulations, along the lines suggested by my noble friends Lord Boswell and Lord Newton. Later this year we will bring forward the regulations. At that point, other Ministers and I would like to offer Peers the opportunity to meet in a special session in Parliament to gather their views. We envisage an agenda based around the regulations, covering those that relate to the key concerns expressed during the passage of the Bill. I will of course take direction from interested Peers—there are a lot of them—as to the structure of that session. We will set that up as required.

We will also conduct a public consultation on the regulations. Following the finalisation of regulations after consultation, we will bring them back to the House. At that point, we will again offer a session for Peers to complement consideration by the committees of the House. That will not be the last time that the House debates charging; we will bring the affirmative regulations forward for debate.

We also acknowledge the need to evaluate and review constantly the impact of charges on parents. In respect of that, we have already amended the Bill to ensure that the review is published within 30 months of its introduction. Again, I here commit that we will seek the input of Peers during the course of that review in advance of a report being laid before Parliament.

Let me also be specific about what we intend to look at as part of that review. We will want to look at the impact of the application and collection charges on the behaviour of both parents and at the outcomes in terms of establishing effective maintenance arrangements. In our report to Parliament, we will make clear our intentions, including a specific view on the position of the poorest parents.

Pensions: Occupational Pensions

Lord McKenzie of Luton Excerpts

Wednesday 1st February 2012 Lords Chamber

[Lord McKenzie of Luton]

My Lords, like all noble Lords who have spoken, I am grateful to my noble friend Lord McFall for initiating the debate and especially for his role in chairing the Workplace Retirement Income Commission. In six minutes it is impossible to do justice to its recommendations or the subject of our debate. This is an important piece of work which builds on the earlier deliberations of the Pensions Commission, although the noble Lord is right to highlight the change in circumstances in the few years since the commission reported.

Clearly, the economic environment has changed for the worst—a bleak dawn, as my noble friend called it—where real incomes have fallen, confidence in long-term savings is low and real interest rates are negative. At the same time, people continue to live longer. There is both an imperative to save and an expectation that consumers will do their bit to sustain GDP. Low interest rates have pushed up the value of liabilities of DB schemes, making funding more difficult with greater risks on employers. The noble Lord, Lord Freeman, spoke on that. For the DC environment, low interest rates have meant lower annuity rates and slower build up of capital, with the risks falling on individual savers. So it is little wonder that we have seen the number of employees in private sector workplace schemes continuing to decline, with most private sector DB schemes closed to new members and many to existing members. That is before taking account of the threats from the EU, to which my noble friend Lord Hutton referred.

The need to sustain and reinvigorate pensions is clear and the proposition to do this via occupational schemes is to be supported but we would be cautious about how employers should be engaging with employees on pensions and other savings, as this was certainly a bone of contention when auto-enrolment was planned with a distinction between giving advice and providing information. As the noble Lord's commission identified, although not a panacea, the recommendations of the Pensions Commission provided the foundation for reinvigorating occupational pensions. The components are well known, if complex, as the noble Lord, Lord Stoneham, said: a more generous state pension, flat-rating of S2P and the introduction of auto-enrolment. However, as we heard, things have moved on and we now have the coalition Government's proposals for a simpler, single-tier pension to consolidate the two components of the state pension and resources from pension credit. A higher state entitlement and the squeezing out of at least some means testing will clearly provide a platform to encourage further saving, but the proposition is not without its technical challenges. Perhaps the Minister will give us an update on the current plans. What work streams are under way to achieve this and what is the planned phasing of the introduction?

The Government are to be congratulated on sticking with auto-enrolment, although we express our disappointment at the deferred start date for smaller companies and at the fact that it will not be until 2018 that the full employer rate of 3 per cent comes into effect. A number of noble Lords identified that the 8 per cent would have to increase over time. Because the Government are raising the earnings figure, now heading north of £8,000, yet more people will miss out.

Like my noble friend Lady Drake, I urge the Minister to confirm that there will be no further delay in the implementation of auto-enrolment. It has the potential to change the occupational pension landscape, although, as my noble friend Lord Hutton said, it is too early to judge. This is linked to the success of NEST, which has the clear remit of delivering a national scheme with low charges. It has been constrained in its construct as part of the consensus that underpins the Pensions Commission's reforms. The removal in due course of the prohibition on transfers in, and of limits to annual contributions, argued for by my noble friends Lord Myners, Lord McFall and Lady Drake, will certainly be right.

A range of other technical issues would help encourage pension savings. New rules facilitating the cashing in of small pension pots—which would give special help to women—tackling short-service refunds, and changing the rules on enhanced transfer values, will all help. We will support the Government as they tackle these measures. We were promised a bonfire of regulations—from the trivial to the huge—by the Pensions Minister. Perhaps the Minister will give us a clue to what is included in the “huge” category, and how this will help to invigorate pension saving.

There is a lot in place or coming on stream that can make a difference, but we agree with my noble friend that there is much that the industry also must do to address fee levels and structures, and secure greater transparency and a more flexible annuity market. The Minister was given novel suggestion by my noble friend Lord Myners. All the measures are vital, particularly if DC schemes are to take the strain of a challenged DB regime. They are also vital if reputations are to be enhanced and confidence generated. The Workplace Retirement Income Commission stressed the need to develop products for DC schemes that mitigated the risk for individual members. This raises issues of collective DC, hybrid schemes and potentially many more, including the consolidation of a range of smaller schemes. Of course, it depends on whether the risk to be shared is the investment risk or the longevity risk. The development of such products and the complexity that they might bring sharpen the need to address the governance of DC schemes.

In conclusion, I congratulate my noble friend Lord McFall again on the work of his commission and on stimulating the debate tonight. As the report says, pension policy needs to be considered in a long-term context of 40 to 50 years—certainly longer than the routine political cycle. An independent pension commission would help sustain the changes that are needed.

Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Tuesday 31st January 2012 Lords Chamber

[Baroness Hollis of Heigham]

The noble Lord is precisely right and has therefore made my point for me. Precisely because that relationship may change over time, we do not want the cliff edge of being on either one-third or three-thirds of the rate. Precisely because, as he says, it changes over time, we want to reduce that cliff edge and not make such a sharp distinction in the spectrum of disability.

The final point that both the noble Lords, Lord German and Lord Newton, argued was that this should be in regulations because they believe in the benevolence of the Minister on the issue, as we all do. I am confident that the enemy of or opposition to the amendment is not the Minister. We know him, as we have been engaged in discussion in Committee and at Report. His principles, integrity, evidence and assiduity are without comparison. His enemy is the Treasury. I put to the House a simple question. Which does the House believe will most strengthen the Minister's arm in seeking to follow the wishes of the whole House as expressed today: leaving it to regulations which we cannot amend some way down the line—three months, six months, nine months or a year—when the Treasury can say “Go away”, as it said to me on many occasions; or passing an amendment today which would insist that the House of Commons and the Treasury think again? If they turn it over, I will be sorry about what I will regard as having happened to their moral compass, but that is their right and privilege.

I know that the noble Lord, Lord Freud, will have to read his script. I do not expect him to either confirm or deny this, but he will have to read out things that he would wish he could say differently. Whatever he may say, if we want to aid him today in his battle with the Treasury on behalf of the most vulnerable people in our entire society, we will support the amendment to establish the principle of proportionality in the Bill.

[Lord McKenzie of Luton]

My Lords, we support the amendment moved so comprehensively and eloquently by the noble Baroness, Lady Meacher. This has been a powerful debate with a strong ethical strand, as my noble friend Lord Peston said that it should be. My job is made easier by the contribution we have just heard from my noble friend Lady Hollis, who dealt comprehensively with those who argue that we should deal with this in regulations. The fact is that we have tried at earlier stages to reach the position that the amendment now provides and have been unsuccessful—as my noble friend said, possibly not because that is where the Minister wants to be but because that is the policy imposed on him. I think that my noble friend is absolutely right: if we pass this amendment today, we will put down a clear marker on proportionality, which will strengthen those who have to go and argue with the Treasury about resources.

As we have heard, the amendment seeks to prevent the interests of one group of disabled people being played off against those of another by limiting the ratio between the higher and lower levels of disability support. At present, as we have heard, the Government’s proposals would lead to a significant cut in the amount of support for disabled children on the lower rate of support, amounting to some £27 a week, or over £1,300 a year, with around 100,000 families seeing this drop in their support. We have heard some graphic descriptions from my noble friend Lady Wilkins about what support meant for her family. We also heard from the noble Lord, Lord Wigley, and the noble Baroness, Lady Browning, who made the very telling point that this is about the whole family—siblings as well—for whom the level of support can make a real difference.

The Government have suggested that this money would be recycled into higher levels of support for disabled adults on the higher rate, but we do not believe that this is a trade-off that anyone wants to see. The interests of adults with severe disabilities should not be played off against those of children with lower-level disabilities, which, as we have heard, may well include conditions such as Down’s syndrome and profound deafness. Such children have no opportunities themselves to increase their income, and we know the problems that parents caring for these children can face when trying to find paid work or increase their hours.

The amendment does not seek to prescribe the levels of support, which will of course be a matter for the Government of the day and will depend on what resources allow, but it does seek to embed the principle that, although there is a need to recognise that some conditions require a higher level of support than others, this should not be used as a reason to downgrade the needs of the many disabled children—and their families—who currently rely on the lower level. Perhaps the Minister could outline in his response, first, what he believes the ratio between the two rates should be and, secondly, how he intends to ensure that those on the lower level do not see a dramatic fall in the support that they receive.

We will doubtless hear again that transitional relief will protect some claimants. However, we know that this is not a protection in real terms and in any event it does not help new claimants. Perhaps we can hear from the Minister what changes in household circumstances he considers would break even this partial protection. In making these judgments, what weight do the Government give to the fact that disabled children are more likely to live in poverty than other children? The Minister may justify the current ratio as aligning support for adults and children. However, is it not the case—a point made by the noble Baroness, Lady Meacher—that the routes into the benefit are quite different: for disabled children through the DLA and for adults through the WCA? Is there not a disability disregard for disabled adults who can access work?

Much of our debate on the Bill has focused on its impact on children. We would all, I hope, recognise the necessity of combating poverty among children because it carries with it the prospect of greater poverty in later life. However, it would seem that on this matter the Government are shifting resources in the other direction from children to adults.

It is perhaps appropriate that today we heard from the UK’s four Children’s Commissioners, who have put out a notice. I should like to finish by quoting them:

“Families who receive welfare benefits are particularly vulnerable because they live in poverty—small changes in their household income can have a big effect on their welfare. We are concerned that many more families and their children will be pushed into absolute poverty over the coming years if these proposed changes go ahead”.

We support the amendment.

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

My Lords, I think that I have to take up the challenge of the noble Baroness, Lady Hollis, and try not to read anything at all in order to convince her that I actually believe in what I am going to say.

I preface my remarks by reminding noble Lords that the amendment is in the same territory as the one we discussed on Report that was moved by the noble Baroness, Lady Grey-Thompson, and on which there was a Division. I confess to feeling slight surprise when I saw it come back in such a similar guise. If my arguments sound somewhat familiar to noble Lords, it will be because they have heard many of them before. I need to go through them in the context of this skilfully drawn-up amendment.

I start by making it absolutely clear to all noble Lords—in particular, to my noble friend Lady Browning—that this is not about deficit reduction. Every penny of the money will be recycled to increase support for severely disabled children and adults. None of the money that we are talking about will go to Her Majesty's Treasury, with which I have absolutely cordial relations at all times. The principle that was picked up by my noble friends Lord German, Lord Newton and Lady Thomas concerns the cliff edge that exists at 16 when youngsters transition from childhood to adulthood. As my noble friend Lady Browning pointed out, many of these youngsters are in practice dependent on their families for a long time. The cliff edge is something that we wanted to smooth out. This will be essential to protect work incentives in adulthood.

I said many times in the debate that we are overhauling the whole support system for people who rely on benefits. It simply does not make sense to concentrate on any one element. The universal credit will provide a package of support for families to meet a range of their needs. That is why we need to look at the overall impact of universal credit on families rather than look at individual components. If some families get a bit less on one component, it does not mean that they will get less overall. I will pick up on the point raised by the noble Baronesses, Lady Meacher and Lady Wilkins, about some of the social activities that are required to have a good quality of life. The intention is for DLA to pay for those facilities. The purpose of universal credit is income replacement. The two benefits do different things.

I also remind noble Lords that, contrary to some estimates that have gone around this afternoon on the impact of universal credit, clearly the impact will be that families will be much better off. I remind noble Lords that I and my friends in the Treasury are managing on a steady-state basis to put £4 billion a year into the pockets of the poorest people through universal credit. That is the context in which we are making these changes. Noble Lords should not underestimate what it took to get that out through a government process: a steady-state £4 billion a year in universal credit for the poorest.

--- Later in debate ---

[Lord Freud]

I am very grateful for the applause. I am not hearing a lot of it. The modelling that we have done in the department shows that, as a result of this measure on the reform of disability payments, the number of disabled children living in relative poverty will be negligible. The support for families in the universal credit package includes generous disregards for parents, plus the disability addition to the child element. Of course, we are also supporting formal childcare costs right the way down the hours spectrum in universal credit.

[Lord McKenzie of Luton]

I do not know whether the Minister is going to say anything further about poverty figures, but how does he deal with the report from the Family and Parenting Institute, prepared by the IFS, showing that relative child poverty will increase between 2010-11 and 2015-16 by around 400,000, and that absolute child poverty, as defined in the Child Poverty Act, will increase between those years by around 500,000? Does he dispute those figures?

[Lord Freud]

My Lords, we have spent a lot of time on child poverty, and the IFS projections do not take account of quite a few matters. They certainly do not take account of any change in government policy. Child poverty, to people’s surprise generally, actually went down last year, and it is projected to go down this year. What happens in future will depend on how we respond. I should point out to the noble Lord that the IFS had some very positive things to say about the impact of universal credit on child poverty, and it has pointed out the impact that universal credit will have as it goes in the direction that he and indeed I want to see.

Let me go through some of the figures on what happens under universal credit for a parent with a disabled child who works 20 hours a week on minimum wage. That parent, and that family unit, is likely to be £73 a week better off in work under universal credit, compared with £13 in the present system under tax credits. There are some 30,000 more families with a disabled child in work than out of work, so that extra money is being targeted pretty effectively.

Let me remind noble Lords again about the figures for the support that we are providing. Under universal credit, an out-of-work family with a disabled child can receive just over £8,000 a year in benefits for its child after introduction of universal credit, compared with just over £4,000 for an out-of-work family with a non-disabled child and around £1,000 for a family that receives only child benefit.

--- Later in debate ---

[Lord Freud]

No, my Lords. Without wanting to get into a huge constitutional debate about this, my understanding is that if the House of Lords threw them out, there would at some stage have to be a satisfactory set of regulations that both Houses could agree. So it is a very powerful thing to do. Clearly, I would hope never to get into that position, which is why—

[Lord McKenzie of Luton]

What the Minister says about affirmative regulations is right, but is he aware that it is the stated position of the Conservative Party in this House that it does not vote against affirmative regulations? In recent times we have had several such debates, and the Conservative Party has declined to do this on principle.

[Lord Freud]

When we were in opposition we certainly did not vote on a fatal basis, which was our policy. If the House feels strongly about a set of regulations and the Opposition do not have such a self-denying ordinance—which I think they do not—they can express their view in a vote on the regulations.

Welfare Reform Bill

Lord McKenzie of Luton Excerpts

Tuesday 31st January 2012 Lords Chamber

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

My Lords, on 22 December last year, the Scottish Parliament voted on a legislative consent Motion to the Bill. Legislative consent was given in relation to several provisions. However, the Scottish Parliament did not give consent in respect of the provisions of the Bill that give Scottish Ministers the power to make consequential, supplementary, incidental or transitional provisions by regulation in relation to universal credit and the personal independence payment. I indicated on Report that I intended to bring forward these amendments, removing the relevant provisions from the Bill, to ensure that the UK Government adhere to the principles of the Sewel convention. As social security is a reserved matter, it will not have an impact on the introduction of universal credit or the personal independence payment. Scottish Ministers will still need to make changes to legislation within the competence of the Scottish Parliament—for example, to add references to these benefits to legislation for housing, health and education, and to remove references to existing benefits that will be abolished in due course. Where necessary, they will do this through a Bill in the Scottish Parliament instead of through regulations. I beg to move.

[Lord McKenzie of Luton]

My Lords, I do not believe that we have a problem with the amendments in this group, but perhaps the noble Lord will clarify something. If we are removing the power of Scottish Ministers to deal with consequential amendments, where does the power lie—or is the Minister saying that there is no need for the power?

[Lord Freud]

No, my Lords, I am saying the opposite. The Scottish Parliament has decided that it wants to make the consequential amendments and not rely on us making them. If Scottish Ministers want to do it that way round, that is a matter for them. We were trying to make life more convenient for them.

[Lord McKenzie of Luton]

I am grateful to the noble Lord. Obviously we support the amendment.

Amendment 3 agreed.

--- Later in debate ---

Moved by

[Lord McKenzie of Luton]

4: Clause 40, page 18, line 40, leave out “work has such meaning as may be prescribed” and insert ““better paid work” and “more paid work” shall have such meaning as may be prescribed in regulations subject to the affirmative resolution procedure”

[Lord McKenzie of Luton]

My Lords, one issue that lacks clarity at present concerns “work”, “better paid work” and “more work”. We are using the opportunity of Third Reading to elicit further information on this important matter. The amendment seeks to ensure that not only “work” must be defined for the purposes of universal credit, but that there should be clarity on “more paid work” and “better paid work”, and on how the requirements would be applied. The definition of work is relevant to the current benefit system as well as to universal credit. It is relevant for the application of the benefit cap—or cliff edge—on one side of which one is free and, on the other, one is within its grasp. For the benefit cap, we know that initially receipt of working tax credit will be sufficient to take somebody out of its grasp. Perhaps the Minister will say whether there is any further news on what the threshold for work will be in these circumstances in the world of universal credit.

The amendment is principally focused on getting an update on how in-work conditionality will work. It is some three months since we debated this in Committee, when the development of how things would work in practice was pretty sketchy. What appeared to be settled was that in-work conditionality would cease when somebody was earning the equivalent of 35 hours at the national minimum wage: approximately £11,000. The threshold for a couple may be double that of an individual, and the threshold for a lone parent may be lower. It is accepted that having a universal benefit that removes the distinction between in-work and out-of-work benefits raises the issue of in-work conditionality. Universal credit claimants will have an entitlement regardless of the hours they work, up to a limit. Before we leave the Bill, or it leaves us, we seek an update on the latest thinking. Presumably, for universal credit to be effective, this is not an optional extra.

On 26 October in Grand Committee, the noble Lord told us that there were a range of complicated issues to work through. He said:

“Critically, we will need to build our understanding of what can help claimants progress—when we should require claimants to look for more work and what role other interventions, such as skills assessments or careers advice sessions, can play … We are not rushing in here ... We recognise that we need to tread carefully in this new area”.—[Official Report, 26/10/11. cols. GC295-96.]

That was fine, but is there any progress to report? My noble friend Lady Drake put the issue very succinctly in the Committee debate. She referred to the significant discretion that the Government would have under the new arrangements: a discretion that would potentially impact on a sizeable section of the workforce and on existing in-work relationships, and would require Jobcentre Plus or outside providers to engage with a large number of companies.

In Committee there was vagueness also in respect of the roles of Jobcentre Plus staff and external providers, and on issues of capacity. In particular, there was no clarity on how this would fit in with the work programme. We know that remuneration for providers under the work programme will come in three ways: an attachment payment, a job outcome payment and a sustainment payment. The latter will be the biggest element of the fees in each of the eight claimant groups. How will in-work conditionality interrelate with the work programme? Will sustainable payments be due only when providers have not only helped somebody into work and sustained them in work, but sustained them in work at a level that meets the requirements of in-work conditionality? Presumably this was not effectively factored into contract negotiations ab initio because of the vagueness around these concepts. Do the work outcomes for which providers are paid align with the in-work conditionality that is proposed, and include the claimant commitment on a case-by-case basis?

In Committee, there was a hint that in-work conditionality might be applied only when somebody has left the work programme. The Minister said:

“Once claimants have left the work programme, we could then look to continue working with them to help them progress”.—[Official Report, 26/10/11; cols. GC 295-96.]

There was also a hint that there might be a future work programme to which individuals would migrate. What is happening on that? If one is to be developed, can we be assured that the lessons of the first work programme and the comments of the National Audit Office are taken fully into account, especially on compiling a business case before a decision is taken to proceed and on going live before the IT is in place?

The definition of “work” and, especially, new issues around “more paid work” and “better paid work” are important to how universal credit is to operate. This is an opportunity to provide up-to-date information to noble Lords at this last stage of our deliberations. I invite the Minister to do so. I beg to move.

[Lord Freud]

My Lords, before I start on the specific matter, I shall take a short period to thank the noble Countess, Lady Mar, for her remarks a few minutes ago which I appreciate.

This amendment relates to the definitions of “better paid work” and “more paid work” and would require the regulations to be subject to the affirmative procedure. The first point I want to make is that it is not necessary to define these terms. They have their natural meaning: working for more hours, increasing your pay and so on. To that extent, we cannot accept the amendment, but I understand that it is a way of looking for information and I am very happy to have the opportunity to provide it.

These phrases are important. Their inclusion in Clauses 15 to 18 allows us to impose work-related requirements on claimants who are already in work. We are currently able to impose requirements on existing JSA claimants who are in some work and we need to retain this capability. Obviously, we are interested in doing more and extending conditionality to claimants who are in relatively substantive levels of work but who are nevertheless capable of working more. A conditionality regime can play an important role in encouraging such claimants to progress towards more self-sufficiency and to raise their standard of living and general status. Clearly, I understand noble Lords’ concerns about the extension of conditionality in this way. It is new and it is a difficult area. I also understand the way that noble Lords want to stay in touch with developments as they progress, so let me reiterate and perhaps expand on the remarks I made on Report.

At the launch of universal credit, we will not be imposing conditionality on claimants in substantive employment. In other words, there will be no conditionality for claimants with income or earnings which would, broadly speaking, have taken them over the cut-off point for current out-of-work benefits. We will retain our emphasis on those claimants who would be eligible for JSA, ESA or income support now. The existing system, in that sense, will continue.

As a general point about how we are going to introduce universal credit, we are trying to be incremental and to lock in gradually the opportunities that it represents. Before we extend conditionality to claimants with earnings above this level, we will run pilots. We want to gather views on the approaches that could be taken in these pilots and we will therefore be consulting widely. Depending on the design, we expect such pilots to require regulations. They will be subject to the affirmative resolution procedure and therefore to debate in Parliament. I think we have had enough discussion about what that means. I thank the noble Baroness, Lady Hollis, on that point. I have committed to publishing details of any pilots, to monitoring the results of the pilots, in particular, the outcomes for claimants, and to making those results available for scrutiny. We will reflect on this before adopting any national approach. I remind noble Lords that we considered and passed an amendment that I tabled earlier to allow us to test every aspect of universal credit to see how it would change. This is clearly one area where we could do a lot of testing about how different things work.

--- Later in debate ---

I hope that what I am saying is interesting and reassuring. We are giving a clear undertaking that we will proceed carefully, consult widely and make our proposals open for scrutiny. On that basis, I hope that the noble Lord will withdraw his interesting amendment.

[Lord McKenzie of Luton]

Before the noble Lord sits down, I thank him for that full response, but can he deal with the point about whether there has been any development of the definition of work for the operation of the cap in universal credit?

[Lord Freud]

No, my Lords, I am not aware that we have locked that down at this time. It is an issue that we are going to have to address when we lock down universal credit. I cannot update the noble Lord on that matter.

[Lord McKenzie of Luton]

My Lords, I am grateful for the update that we have had. I guess that we just look forward to further developments on those issues. I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

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Moved by

[Lord McKenzie of Luton]

14: Clause 146, page 109, line 4, at end insert—
“( ) Nothing in subsections (1) to (5) have the effect of changing the requirement in the Child Poverty Act 2010 for the Secretary of State to publish and lay before Parliament a UK Child Poverty Strategy and to describe the progress that he considers necessary—
(a) to meet each of the targets in sections 3 to 6 of that Act in order to reach these targets by the end of the target year; and(b) the progress he intends to make in the period covered by the Strategy to ensure that so far as possible children do not experience socio-economic disadvantage.”

[Lord McKenzie of Luton]

My Lords, Amendment 14 seeks further clarification about the purpose of the changes that the Government introduced to the Child Poverty Act on Report. These altered the description of what the Government would do to achieve the target to end child poverty by 2020, as set out in the Act, from making progress to taking measures. Having reviewed the text after Report stage, we are concerned that this alters the substance of the Act to require the Government’s child poverty strategy only to set out what they propose to do rather than the progress they intend to make; that is, to remove the duty on the Government to make progress towards the targets.

The amendment was laid at the end of our deliberations and proceedings on the last day of Report. We probed this a little on Report, when the Minister reassured me that the amendment was intended to clarify the Child Poverty Act and not to change the substance or to affect the law. Stephen Timms, the Minister responsible for that Act in the Commons at the time, stated that “Clause 8”, which has subsequently become Section 9,

“requires the Secretary of State to publish a strategy every three years, to set out the progress intended over that three-year period in each of the policy areas specified in subsection (5), and to describe the progress needed over that period to meet the 2020 targets. In that way, the strategy will set milestones to 2020”.—[Official Report, Commons, Child Poverty Bill Committee, 27/10/09; col. 142.]

Will the Minister confirm that this is the function that the strategies will still play; that is, that they will both set out the progress that the Government intend to make and the progress needed to meet the 2020 target?

Our amendment would ensure that this substance of the original Child Poverty Act would remain the substance of the current version. If the Minister does not feel able to accept it, will he describe for us the difference between what he proposes should now be in the Act and the original version, so that we can have a second chance to assess the merits of each? I beg to move.

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[Lord Freud]

My Lords, Amendment 14 is designed to place a caveat on the amendment to Section 9 of the Child Poverty Act which is already included in the Welfare Reform Bill. As I discussed on Report last week, the amendment to Section 9 is a clarification which confirms the Government’s existing understanding that the requirement in Section 9(7) of the Child Poverty Act for a UK strategy to describe progress can be met with a description of progress in narrative or policy terms, rather than in numerical or statistical terms.

This amendment appears to seek clarification that the changes already agreed by the House will not undermine three requirements on the Secretary of State which are included in Section 9 of the Child Poverty Act; namely, first, that he must publish and lay before Parliament a child poverty strategy; secondly, that he must describe in that strategy the progress that he considers necessary to meet the four child poverty targets by the target year of 2020-21; and, thirdly, that he must describe in that strategy the progress he intends to make over the period of the strategy to reduce socioeconomic disadvantage as far as possible.

I can state clearly on the record that our amendment to Section 9 is not designed to remove the requirement on the Secretary of State to do any of those things. The Secretary of State will continue to have a duty to produce a strategy every three years which sets out the measures that will be taken, and the progress that needs to be achieved, in that period in order to meet the targets by the target year and reduce socioeconomic disadvantage as far as possible. The purpose of our amendment to Section 9 is not to change the substance or effect of the law. The amendments simply clarify how progress can be described—in particular, that it can be described in policy or narrative terms rather than statistical or numerical terms if the Secretary of State so wishes.

I discussed on Report the reasons why we think that this clarification is important. We believe that a requirement to set out the progress required in statistical terms is equivalent to a requirement for interim targets on child poverty towards the 2020 target. Interim targets incentivise the short-term, income-transfer approach that we have seen in the past. That approach has not worked and completely fails to address the underlying problems. This can lead therefore to small amounts of money being given to families just to lift them over the poverty line.

The Government remain committed to eradicating child poverty and improving social mobility. We do not believe, however, that the right way to achieve these aims is by using income transfers to move people above an arbitrary line, so we must focus on tackling the root causes of poverty and changing behaviour. In the long term, those with the lowest level of income can only improve their life chances by keeping pace with those at the top. This is why we must take long-term sustainable measures to improve skills, abilities and aspirations. An income-transfer approach does not work because it is unsustainable and does not deal with or address the underlying causes of long-term deprivation. We will continue to monitor progress through the annual publication of the Household Below Average Income Statistics, the beloved HBAI. However, we think it is very important to clarify that the law does not require the child poverty strategies to set out interim income targets. It is because of this that we cannot accept the amendment. By reintroducing the wording of the original Child Poverty Act, in effect it would remove the clarification that we introduced using the amendment to Section 9.

I emphasise that we remain fully committed to eradicating child poverty, and that amendment does not alter current government policy. We will continue to be required to produce a strategy every three years which sets out the measures that will be taken and the progress that needs to be achieved over the period. This amendment is unnecessary and unhelpful. The requirements it seeks to place on the Secretary of State already exist. All it will do is reintroduce lack of clarity regarding how progress is to be described, and I therefore urge the noble Lord to withdraw it.

[Lord McKenzie of Luton]

From what the noble Lord has just said, it seems that what the Government did on Report sought to change the import of what is set out in the Child Poverty Act. If it removes what the noble Lord thought might be the need to have interim targets along the way, surely that is a change, otherwise what is the clarification about? Part of the strategy is to hit some very clear targets by the end of 2020, and I presume the noble Lord is not seeking to change that requirement, but what is it about the current wording that has been changed? I am sorry that I am not being very clear on this, but the Minister has said that there is no change and it is all the same as before and this is just a clarification. However, I thought he said when explaining it that it obviated the prospect of having to put in interim targets when the strategy is developed along the way towards 2020. If that is the case and the requirement for those interim targets is removed, that is a change. It may be that that is what the Minister and the Government want, but it is a change. If it is not a change, can the Minister have another go at explaining why not?

[Lord Freud]

My Lords, what I hoped that I had explained, although I failed to do so adequately, was this. As currently written, the Act is somewhat ambiguous. We and, I imagine, the previous Government have always interpreted this as needing to describe the progress we are making in policy terms in a way that does not require interim targets because such targets, when set every year, become absolutely tyrannical. They are particularly tyrannical when you are trying to change people’s lives and behaviours in a fundamental way. If you are worrying about interim targets every year, your efforts are undermined. This is a clarification to make it crystal clear that our understanding of the Act, and to be honest what I think was the previous Government’s understanding of the Act—the noble Lord and I spent many happy hours going over every word of it, although I am still not sure that I understand the word “socioeconomic” in it, but let us put that to one side—is that we can progress in the way we think is best, which is pursuing fundamental change for people, without the tyranny of interim targets. The previous Government did not want them and we do not want them. We want to be able to describe our progress towards the main target. I hope that the noble Lord will agree that that is the desirable way to go with this.

It is not an easy thing to do. Dealing with child poverty is really tough. The noble Lord knows it and I know it, as do we all. Let us not mess about with it, but try to do the fundamentals, and this is what we need for that. We need to be absolutely clear that this approach will work.

[Lord McKenzie of Luton]

My Lords, it is a pity that this came up at the end of the Report stage and that we do not have another chance to review the record. I am minded not to press the matter this evening, but frankly I am not sure whether colleagues in another place or we in another situation might not wish to re-engage on the issue. The key issue along the way is what the Government will be prepared to commit to and how progress towards the 2020 objective is going to be measured. That, to my mind, is what is missing from what we have just heard from the Minister. However, I do not think it would be productive to test the opinion of the House on what is quite a narrow debate, so we must try to find another way of clarifying this. I accept the assurance given by the Minister. He has put it clearly on the record that this is not meant to change the law or the duty on the Government, and it is not meant to change the obligation that the Government have. On that basis, I will withdraw the amendment.

Amendment 14 withdrawn.

--- Later in debate ---

[Lord Freud]

My Lords, we have brought forward this amendment to ensure that where we have an obligation under EU treaties to allow the free movement of workers, those who have a right to reside here under EU treaties, particularly as jobseekers, may be subject to the full work-related conditionality requirements of universal credit. This amendment enables us to make regulations so that EU migrants cannot fall into groups which are not subject to the work search and work availability requirements. We must meet the UK’s obligations under EU law while ensuring that, when people come here, they do not take inappropriate advantage of our benefit system. We must maintain protections against non-active migrants who travel for the purpose of accessing state support.

We have always maintained that non-active migrants who want to come to the UK should be self-sufficient, and EU law supports this. The amendment will allow us to make sure that jobseekers who exercise their EU treaty right to come to the UK are in fact searching and available for work, as is the case now. I beg to move.

[Lord McKenzie of Luton]

My Lords, we support the thrust of this amendment. Perhaps I may ask one question. We had a helpful briefing note from the Box which reads as follows: “This amendment therefore is designed through this regulation-making power to enable the Secretary of State, so far as possible within the unified structure of universal credit, to maintain the current position in relation to the obligation placed on EU jobseekers”. The phrase “so far as possible” seems to be a qualification on what the Government are seeking to achieve here, and I wonder if the Minister might just expand on what that qualification amounts to.

[Baroness Morgan of Drefelin]

While the Minister is being helpful, perhaps I may seek the indulgence of the House for just a moment. I want to apologise for not having been able to get in to move my amendment because of the crowds leaving the Chamber after the EU Council Statement, but I want to thank the Minister for the telephone conversation I had with him earlier today when he agreed to work with me and with others on monitoring very closely the changes to the work capability assessment for cancer patients.

--- Later in debate ---

[Lord Wigley]

My Lords, since this opportunity is being taken to say thank you, perhaps I may from our Benches—I am sure that others will want to do likewise—thank the Minister and the noble Lord, Lord De Mauley, for the courteous and happy way in which they have handled the Bill. The Minister has always had a smile on his face despite the fact that there have been occasions when I am sure he felt otherwise. He has always been eager and helpful in responding to inquiries. There is a danger that he will become known in the House as “the latter-day Lord Newton”; in other words, the person who the disability lobby knows is really on its side but whose hands are sometimes tied. There can be worse tributes than that. We are very grateful for all the time and consideration that he has given during the past few weeks.

[Lord McKenzie of Luton]

Before the Minister answers the question that I posed earlier, perhaps I may take the opportunity to add our thanks. The Minister’s enthusiasm for universal credit and his commitment to evidence-based policy have been evident to all of us. He has borne a very heavy load in bringing the Bill through your Lordships' House and has done so, as has just been said, with good humour throughout our proceedings. The fact that noble Lords have sought to beg to differ on a number of provisions does not lessen our respect for him or for the determination that he brings to his role. He has of course been ably supported by the noble Lord, Lord De Mauley, and other colleagues. Our thanks go also to the Bill team for their extensive briefings and provision of information, and the helpful way in which they have engaged. I have seen the operation of a Bill team as a Minister and am aware that we see just part of a huge operation which underpins the calm presence that we see in the Box. The scope, the size and the innovative context of the Bill will have added to this challenge. Of course, I thank my team on these Benches for their expertise, passion and support. As I have said previously, I would not have wished to face such a battery when I was a Minister.

The important changes that we have made to the Bill do not belong to us; they are the result of the voices, votes, knowledge, experience and compassion on all Benches in your Lordships' House. I have no doubt that what we send back to the other place is a much better Bill but also one which does not fundamentally undermine universal credit. It remains to be seen what returns in due course. Thus far, I have no doubt that your Lordships' House has done its job in holding the Government to account. What we are dealing with in this Bill touches the lives of millions, including many of the most disadvantaged and vulnerable in our country. Our duty to them is not yet concluded.

[Lord Freud]

My Lords, before I say a few words of my own, I have to admit that the very last question from the noble Lord, Lord McKenzie, was a tribute to him. It is quite difficult to answer; it is in a tricky area. We are pretty confident that we can maintain the position whereby it is only EU jobseekers whom we have to support and not others. As the noble Lord will know, we are moving from providing particular support in JSA to providing general support. That is where the protection is. We are hopeful that, by and large, we can maintain it, but there may be some shadowing of that position.

It is a shame that the crowds trying to get out of our deliberations earlier on slowed down the noble Baroness, Lady Morgan. I can clarify that we had a useful conversation on monitoring cancer patients and I said that the statistics which come out quarterly would become national statistics. I committed to look at what they would show in order to assess how the face-to-face process and other issues were dealt with. She very kindly said that she would help me with that after the consultation. Although we did not debate it, the position is now sufficiently clear on the record.

I do not think that we have seen the last of this Bill, but we have passed a significant point at Third Reading. Perhaps I may use this opportunity to place on record my thanks to noble Lords right around the House for the way in which they have been so constructive, have thought through the issues and been absolutely on the point. I have seen in other Bills a lot of grabbing of the wrong end of the stick and waving it about vigorously, but we have not had that here. Our deliberations have been outstanding. I shall not name all the contributors because it would take all evening—and I would forget someone, which would be invidious.

I was going to say how pleased I was that we had got universal credit through unchanged, but I cannot say that any more. Had it not been for today, we would have had it through. I know that what we are trying to do with universal credit has been understood. The complexity of universal credit is such that, if noble Lords had not appreciated it, it could have been cut to shreds and rendered completely unworkable and basically a disaster. I really appreciate the fact that it has not happened, except on one occasion.

Employment: Sickness Absence

Lord McKenzie of Luton Excerpts

Wednesday 25th January 2012 Lords Chamber

[Lord Freud]

Yes, my Lords. The recommendations in the report were very supportive of maintaining the GP’s role. The independent assessment service could be a supplement to that, which a lot of GPs would find very welcome in helping to get people back into the workplace.

[Lord McKenzie of Luton]

My Lords, if we are going to prevent people becoming ill at work and accidents at work, should we not do more to promote and applaud the health and safety system that we have in the UK? Would the Minister have a word with his right honourable friend the Prime Minister to ask him to stop making ill informed comments that undermine the system?

[Lord Freud]

My Lords, in practice there has been a lot of emphasis on the safety aspects of work and too little on health in work. One of the things that we are trying to encourage is the ramping up of health support, both in work and as people fall out of work. That is why this set of recommendations is so interesting.