Clause 49: Special schemes for claimants of Jobseeker's Allowance

This clause of the Bill enables the establishment of Employment Zones. Employment Zones are defined geographical areas where the Secretary of State for Education and Employment contracts with external organisations, either public or private, to try to help long-term unemployed claimants of Jobseeker's Allowance (JSA) to find sustainable employment.

Plans for Employment Zones were announced by David Blunkett, the Secretary of State for Education and Employment, on 2 February 1999, and consultation over the detailed elements of the proposals is currently underway. Five prototype Employment Zones and three further, smaller-scale development projects were set up during 1998, using existing legislation. But in order to fully implement Employment Zones, primary legislation is needed in the following areas:

• First, Employment Zones are concentrated on specific areas of high long term unemployment; yet current legislation limits the Secretary of State's powers to offer different types of service in different areas;

• Second, a key feature of Employment Zones not available in the prototypes is the "Personal Job Account". This will be an account set up for individual participants in the Zone, which will allow them to anticipate up to six months' worth of spending on training and jobsearch - with the aim of getting them back to work more quickly. It will combine funding equal to the payments that they would normally receive from JSA, with money for training and jobsearch.

• Third, legislation is required so that, when people do not participate in an Employment Zone, without good cause, their JSA payments could be withheld.

Commentary

Subsection (1) enables regulations to provide for special arrangements to be made for JSA claimants in geographically defined areas to assist them to find sustainable employment. This subsection enables Employment Zones delivery agents to undertake schemes which may not be available elsewhere in the country with the intention of assisting people find sustainable employment. Schemes may also cover the whole of Great Britain.

Subsection (2) enables regulations to impose further conditions on receiving JSA to participants in a scheme. For example, Employment Zone participants could be required to complete and agree an Action Plan with their Personal Adviser as a precondition for receiving JSA. Regulations made under this subsection could also suspend the normal labour market conditions, namely, actively seeking and being available for work, for those participating in a prescribed scheme. The amount of JSA payable to Employment Zone participants could be altered depending on the amount of funding they are receiving from other sources. Equally, those participating in this scheme could be entitled to receive lump sum payments during the period of their participation, under subsection (2)(c). This is the provision that enables participants to have access to agreed amounts of their Personal Job Account.

Subsection (3) gives a power to apply the provisions of the Jobseekers Act, with or without modification.

Subsection (4) ensures that the provisions from the Act that may be applied include the rules for when claimants do not meet the conditions of JSA, and the benefit is not paid.

• Section 19 of the Jobseekers Act sets out the circumstances when sanctions may be applied to JSA claimants, and the benefit not paid. Examples are when someone has refused to accept a place on an employment programme, or lost that place through misconduct. Section 20A contains the parallel provision for joint-claim JSA introduced by Schedule 7 (see commentary on clause 48 for details). Subsection (4)(a) provides that the same sanctions regime may be applied to participants in an Employment Zone. It is intended that the regulations setting out the details (for example, the length of the sanction) will be made in the same way as the current power in section 19(2) of the Jobseekers Act and regulation 69 of the JSA Regulations.

• Section 20 of the Jobseekers Act (and the new section 20B for joint-claim JSA) provides for exemptions to the circumstances when JSA is not payable under section19. Examples might be where a person is ill, or on jury service. It also gives the power to define when hardship payments may be made to claimants, even though JSA is not in payment. Subsection (4)(b) ensures that these provisions may be applied to Employment Zones too (subject to any modification under subsection (3)). Again, the intention is to make regulations that correspond to the existing regulations.

Subsection (5) enables the Secretary of State to associate himself, financially or otherwise with arrangements to assist people into sustainable employment. In Employment Zones this may include contracting out and providing funding to Employment Zone delivery agents for the provision of the necessary services to assist people to find work.

CLAUSE 50: INCAPACITY FOR WORK

Background

Entitlement to incapacity benefits is dependent on satisfying one of two tests of incapacity for work set out in legislation.

• The 'Own Occupation Test' normally applies for the first 28 weeks of incapacity, for those with a recent work record. The test assesses the claimant's ability to do their usual job, based on medical evidence from their GP.

• The 'All Work Test' applies after 28 weeks of incapacity for those with a recent work record and from the start of the claim in all other cases. It is a functional test which assesses the claimant's ability to perform a wide range of activities.

The benefits which depend on satisfying the test of incapacity for work are Incapacity Benefit (IB); Severe Disablement Allowance (but see clause 54); Income Support; the disability premiums in Income Support, Housing Benefit and Council Tax Benefit; and, in addition to these benefits, National Insurance credits awarded on grounds of incapacity.

The consultation paper A new contract for welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103) gave a commitment to reform the All Work Test, by changing it so that, as well as establishing the level of people's incapacity for work for benefit purposes, it provides information which will be potentially helpful to claimants and their personal advisers, in combination with a wider assessment of employability, to decide what might be done to assist a return to work.

Summary of changes

Clause 50 and Part II of Schedule 8 work together to achieve this reform. Clause 50:

• renames the All Work Test the "Personal Capability Assessment". This reflects the additional elements added by Part II of Schedule 8, which provide that, as well as producing information for benefit purposes, about people's incapacity,

--    the assessment process should produce information about people's capabilities; and that

--    both kinds of information may be used for the purposes of helping people enhance their employment prospects.

• retains the existing powers for determining whether a person is "incapable of work" for the purposes of receiving incapacity benefits. The threshold of incapacity at which it would be unreasonable to require a person to work, or seek work, will be unchanged;

• enables the Personal Capability Assessment process to be started earlier, with the intention of identifying people's needs as quickly as possible;

• makes clear that the Personal Capability Assessment may be repeated at any time throughout the duration of entitlement to benefit.

Clause 50: Incapacity for work: Personal Capability Assessments

The clause replaces section 171C of the Contributions and Benefits Act, which provides for the All Work Test. New section 171C for the most part mirrors the existing provision for the All Work Test, but renames it the Personal Capability Assessment. It also enables the Personal Capability Assessment to be carried out before a person technically becomes subject to the assessment. The intention is to speed up the process and secure a proper assessment of people's needs at an early opportunity. The section also ensures that the Personal Capability Assessment may be repeated, to determine whether a person continues to be incapable of work.

New subsections (1) to (3) mirror the existing provision for the All Work Test.

• Subsection (1) provides for the "Personal Capability Assessment" to apply in the same way as the All Work Test.

• Subsection (2): allows the details of the Personal Capability Assessment to be set out in regulations. This follows the existing provision for the All Work Test, but deals with capacity as well as incapacity. The existing regulations for the All Work Test set out measures of the extent of a person's incapacity in specified activities which relate to the ability to work. They cover physical, sensory and mental functions (e.g. walking; sitting; bending and kneeling; hearing; vision; concentration and mood). Assessment is based on a scoring system: claimants who reach a set points threshold are entitled to incapacity benefits, subject to meeting entitlement conditions.

• Subsection (3) gives the power to provide for treating people as incapable of work until they have had a Personal Capability Assessment, or have been classed as capable of work for other reasons (for instance, if they fail to respond to a request for information or evidence). It ensures that incapacity benefits can remain in payment pending a decision on whether a person satisfies the test of incapacity.

New subsections (4) and (5) make new provisions for the Personal Capability Assessment.

• Subsection (4): enables a Personal Capability Assessment to be carried out during the first 28 weeks of incapacity (i.e. while the Own Occupation Test still applies for benefit entitlement purposes).

• Currently the process of assessment cannot begin until the date when the All Work Test applies (usually after 28 weeks of incapacity), and can typically take many weeks to complete. This can mean that decisions on benefit entitlement are delayed, and that, following the introduction of the new capability element, information which would be helpful in preparing for a return to work would not be available when it would be of most value - before people have become detached from the labour market. Enabling the process to begin before week 29 is intended to address these problems.

• Subsection (5) ensures that "the Secretary of State" (normally a Benefits Agency official, acting on the Secretary of State's behalf) may require people who have been found incapable of work in accordance with a Personal Capability Assessment (and who are therefore entitled to incapacity benefits) to undergo a reassessment for the purposes of determining whether they are still incapable of work.

Schedule 8: Part II - Incapacity

This paragraph makes amendments to section 171A of the Contributions and Benefits Act, relating to the Personal Capability Assessment provided for in clause 50. The intention of the new assessment process is to produce information about people's capabilities, as well as a decision on their incapacity for work for benefit purposes, and for this information to be used to help them enhance their employment prospects.

Sub-paragraph (2) inserts a new subsection (2A) into section 171A of the Contributions and Benefits Act.

• This new subsection widens the scope of the information or evidence that may be requested from claimants. Subsection (2) of the Act currently provides the power to obtain information and evidence in order to determine whether a person satisfies the test of incapacity for work for purposes of entitlement to benefit. The new Personal Capability Assessment will have a dual function: to determine whether a person satisfies the test for benefit entitlement, and to use information about a person's capabilities gathered during the assessment process to draw up a "capability report" on what they might nevertheless be able to do with appropriate help and support. New subsection (2A) provides for the collection of "information or evidence capable of being used for assisting the person in question to obtain work or improve his prospects of obtaining it" - i.e. information about people's work-related capabilities.

• In practice, much of the information generated during the Personal Capability Assessment process will be equally relevant to the advice whether a person should be treated as incapable of work for benefit purposes, and to the "capability report". However there may be additional areas that may usefully be explored - such as what work-related activities the person might be able to do, and what sort of help they might need to do them.

• Sub-paragraph (3) amends subsection (3) of section 171A of the Contributions and Benefits Act. Subsection (3) at present provides that a person may be called to attend a medical examination where "a question arises as to" whether a person is capable of work. This is now replaced with "where it falls to be determined" whether a person is capable of work, to make it clear that it is not necessary for a medical examination to be preceded by a particular event which has raised a question in the mind of the decision-maker. This amendment supports the provision in clause 50 to clarify the Secretary of State's power to require a reassessment.

• Sub-paragraph (4) inserts a new subsection (5) into section 171A which ensures that all information supplied under section 171A is treated as social security information, and that powers relating to the exchange and disclosure of social security information apply to it. This ensures that information collected during the Personal Capability Assessment which relates to a person's work-related capabilities, as well as information that relates strictly to the question of whether they are technically incapable of work for benefit purposes, can be passed on to personal advisers. It may also be used more generally, for the purpose of enhancing a person's employment prospects and rehabilitation. The relevant powers dealing with information are section 3 of the Social Security Act 1998 and clause 60 of this Bill (see later commentary).

• Paragraph 22 is a minor change of wording, consequential on the renaming of the All Work Test

CLAUSES 51-54: INCAPACITY BENEFITS

• amend the National Insurance contribution conditions for new claims;

• provide for the taking into account of income from occupational and personal pensions when assessing what amount of IB people receive;

• extend entitlement to IB to long-term incapacitated people who claim while aged 16-19, who would currently receive Severe Disablement Allowance.

They also:

• abolish Severe Disablement Allowance for new claimants (clause 70 provides powers to protect the benefit for existing recipients.)

The Government's proposals were published in the consultation document A New Contract for Welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103) in October 1998.

Clause 51: Incapacity Benefit: restriction to recent contributors

• First, they must have paid either Class1 (employed) or Class2 (self-employed) National Insurance contributions, or a combination of both, on earnings equal to at least 25 times the Lower Earnings Limit (currently £64.00 a week) in any one tax year prior to the benefit claim.

• Second, they must have paid, or been credited with, either Class1 or Class2 National Insurance contributions, or a combination of both, equal to at least 50 times the Lower Earnings Limit in each of the two tax years prior to the benefit year in which they claim IB. A benefit year begins on the first Sunday in January; the tax year starts on 6 April.

This clause amends the entitlement rules for IB, so that benefit is paid only to those who have recently worked and paid National Insurance contributions.

Subsection (2) replaces the first National Insurance contribution condition, by replacing paragraph 2(2)(a) of Schedule 3 to the Contributions and Benefits Act. To qualify for benefit in future, claimants must actually have paid either Class1 or Class2 National Insurance contributions, or a combination of both, on earnings equal to at least 25 times the Lower Earnings Limit in one of the last two tax years before the benefit year to which the claim is made, rather than in any one tax year. This brings IB more into line with contribution-based Jobseeker's Allowance (JSA). The second contribution condition will remain unchanged.

The current provision, in paragraph 2(7) of Schedule 3 to the Contributions and Benefits Act, allows people who do not satisfy the second condition at the time they first claim to make a repeat claim at a later date when they will satisfy it (usually the following January, when the start of a new benefit year triggers a different pair of tax years). Subsection (3) extends this to cover the new first condition. This will ensure that people who, at the point they fall ill or become disabled, have paid sufficient contributions to satisfy the contribution conditions (but only from a future date), are not permanently prevented from qualifying for IB.

For example: a student who works only for a few months after leaving university and then has a serious accident, would have paid contributions in too recent a tax year to qualify for IB-and would not be able to claim the benefit without this provision.

Subsection (4) provides a regulation-making power to modify the normal contribution conditions for people in a specified class. It is intended to use this power to protect people who have paid contributions at some stage but who have not had the opportunity to do so recently because, for example, they have been carrying out caring responsibilities for which they receive Invalid Care Allowance. It will also be used to protect people who were in receipt of IB in the tax year before a new claim; without this protection, they may be unable to re-qualify for benefit after short breaks in entitlement.

Clause 52: Incapacity Benefit: reduction for pension payments

This clause provides for IB to be reduced where a claimant has income from an occupational or personal pension above an amount to be specified in regulations. The Government announced in the consultation document "A New Contract for Welfare: SUPPORT FOR DISABLED PEOPLE" their intention that 50% of the excess income over £50 a week would be deducted from future claims to IB. This brings IB more into line with contribution-based Jobseeker's Allowance (JSA), where 100% of occupational or personal pension income above £50 per week is deducted from benefit.

The clause makes these provisions by inserting a new section 30DD into the part of the Contributions and Benefits Act that contains the rules for IB.

• The new section 30DD(1) provides a regulation-making power for income from occupational pensions, personal pensions, and public service pensions, in excess of a prescribed amount, to be deducted when assessing IB. The relevant types of "pension payment" are defined in section 30DD(3) and (4).

• The new section 30DD(2)(a) provides a regulation-making power to specify the level above which income should be taken into account (i.e. £50 a week), and how much of the excess income should be deducted (i.e. 50% of it).

• The new section 30DD(2)(b) allows exemptions to be made. For example, the intention is to use this power to disregard payments where the pension payments are in connection with the death of a member of a scheme, or where an occupational pension scheme is in deficit or has insufficient resources to pay the full pension.

• The new section 30DD(2)(c) gives the power to assume a notional income (as is the case in JSA - Regulation 105 of the Jobseeker's Allowance Regulations (1996) provides) where a claimant deliberately fails to avail himself of a pension payment so as to increase or maximise his benefit. It will allow the DSS to take into account the amount of money which the claimant deferred in order to maximise his IB.

• The new section 30DD(2)(d) provides the power to apportion pension payments into weekly payments. For example, this will enable monthly pension payments to be converted into weekly amounts so that they can be deducted from IB on a weekly basis.

• The new section 30DD(3) provides the power to prescribe other types of pension, or similar, income for which a deduction may be made (as is the case for JSA). The Government intend to use the power to prescribe that permanent health insurance payments in excess of £50 a week should be deducted from future IB claims. This would apply to those permanent health insurance schemes that are arranged by employers to provide for employees, where the contract of employment has ended. It would not apply to schemes used to fund normal occupational sick pay.

• The power in new section 30DD(3)(c) to specify other payments would enable income to be taken into account if new products are developed which provide similar income to occupational and personal pensions or permanent health insurance.

• The new section 30DD(4) provides the definition of occupational pensions, personal pensions and public service pensions to be taken into account, when assessing IB. These pensions are defined in the Pension Schemes Act 1993 and are already used for JSA.

The Bill provides (at Part IV of Schedule 8) for any regulations concerning the definition of pension payments to be subject to affirmative resolution by both Houses of Parliament. That is to say, the regulations must be approved by Parliament before coming into force. This is in line with the procedures for JSA.

Part II of Schedule 8 makes some minor amendments to existing legislation as a result of the Bill's provisions for IB.

Clause 53: Incapacity benefit: persons incapacitated in youth

Subsection (1) amends the entitlement conditions for IB set out in section 30A of the Contributions and Benefits Act, and provides that this group may receive IB without meeting the contribution conditions.

Subsections (2) and (4) make consequential amendments.

Subsection (3) inserts a new subsection (2A) into section 30A of the Contributions and Benefits Act.

• To be entitled to IB without having satisfied the contribution conditions, a person must have become incapable of work before the age of 20, must satisfy the conditions of residence and presence in the country, and must not be in full-time education. Subsection (3)(c) explains that these people may not receive IB for the first 6 months of incapacity. This is intended to ensure that the benefit is correctly targeted at those with long-term incapacity for work.

• The newly inserted subsection (2A)(d) gives regulation-making powers to define the residence and presence conditions. It is the intention to use this power to require claimants to have been ordinarily resident and present in Great Britain for a total of at least 26 weeks in the year preceding the date of entitlement.

Subsection (5) inserts a new subsection (6) into section 30A of the Contributions and Benefits Act. The intention is to use this power to define "full-time education" as applying only to people aged 16-18, and to provide that, in order to qualify for benefit, they must spend less than 21 hours a week in education (excluding any time spent on a course not normally taken by a non-disabled student).

Once a person has qualified for IB under these new rules they may re-claim benefit after the age of 20, following a break in claiming, if the new claim "links" with the previous period of entitlement to IB. For claims to link, the break between benefit claims must not exceed 8 weeks. For those who leave benefit because of starting work the linking period is extended to 52 weeks under the Welfare to Work Regulations 1998.

Clause 54: Abolition of Severe Disablement Allowance;

SDA is a non-contributory, non means-tested benefit, paid to people who cannot work because of illness or disability, and who have been unable to pay sufficient National Insurance contributions to qualify for Incapacity Benefit (IB). For people who become incapable of work before the age of 20, the qualifying test of "incapacity" is the same for SDA as for IB-but those aged 20 and over must additionally be assessed by a doctor as "80% disabled".

Approximately 70% of SDA recipients also claim Income Support to top up their income, and therefore see no financial gain from claiming the benefit. This is because SDA is paid at a lower rate, and is always deducted pound for pound when calculating the amount of Income Support payable.

Part IV of Schedule 10 makes the necessary consequential amendments and repeals for the abolition of SDA.

Clause 70 provides a regulation-making power to make transitional provisions-which will be used to protect existing recipients. In A new contract for welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103), the Government said that those recipients aged 20 or above at the point of change would continue to get the benefit.

The Government intends to make regulations that will automatically transfer those entitled to SDA, who are under the age of 20 at the time the changes are introduced, on to long-term Incapacity Benefit a year later. This will give this group of people access to long-term IB at the same time as those who became entitled to short-term IB under the new entitlement conditions introduced by clause 53 in this Bill.

CLAUSES 55-56: DISABILITY BENEFITS

• introduce regulation-making powers for Attendance Allowance;

• amend the terminology relating to awards made for an indefinite period; and

• extend entitlement to the higher rate mobility component of Disability Living Allowance to 3-and 4-year-old severely disabled children with serious mobility problems.

Background

The consultation paper also proposed the introduction of a "Disability Income Guarantee" to provide additional help for disabled people aged under 60 with the greatest needs and lowest incomes. This measure does not require primary legislation.

Disability Living Allowance (DLA) is a benefit to help with the extra costs of disability. It has two components:

• the care component, which has three rates of payment and is available for those who become disabled, need care and attention, and claim the benefit below the age of 65; and

• the mobility component, which has two rates of payment and is available for those who become disabled, have serious problems with their mobility and orientation, and claim the benefit between the ages of 5 and 65. The higher rate mobility component is paid to those whose mobility is very seriously restricted; the lower rate is for those who can walk, but need guidance or supervision.

Although the main conditions of entitlement are set out in primary legislation, there are regulation-making powers which enable the circumstances to be prescribed in which a person is taken to satisfy or not satisfy the conditions of entitlement.

Attendance Allowance (AA) is a benefit paid towards the extra costs of people who are so disabled that they need care and attention from another person, and who become disabled, or claim the benefit, after the age of 65. The conditions of entitlement and the circumstances in which a person qualifies for AA are currently set out in primary legislation. There are two rates of payment: a lower rate for those who need care either by day or night, and a higher rate for those needing both.

Both DLA and AA are non-contributory, non-means-tested benefits, which are paid tax-free. Awards may be for a fixed or indefinite period.