APPENDIX 2
Reply from the Department for Work and Pensions
Proposal for the Regulatory Reform (Carer's Allowance)
Order 2002
1. Thank you for your letter of 24 January
outlining the concerns of the Deregulation & Regulatory Reform
Committee after their first discussion of the above Order.
2. Their main concern centres on the financial
protection available to the group of carers who are currently
aged under 65, and who will cease to be entitled to Invalid Care
Allowance (ICA) on reaching 65 years under the proposed provisions
of the Order.
3. In order to answer the Committee's concerns,
and put our response into context, I think it would be useful
to outline the overall plan for the benefit.
Background
4. (a) The proposal is to remove
the age restriction, currently 65, for carers claiming ICA. This
will allow older carers to claim ICA, and gain access to the Carer
Premium (CP), paid with various income related benefits.
(b) Entitlement
to ICA rests on a number of conditions, principally that (1) the
carer is providing regular and substantial care to a severely
disabled person, and (2) that they are not in gainful employment
(see section 70 of the Social Security Contributions and Benefits
Act 1992).
(c) Currently, under the concession, carers
continue to have entitlement to ICA (if they qualified before
age 65) after age 65 without having to meet these two main conditions.
This feature dates from the period before National Insurance credits
and Home Responsibilities Protection existed to protect Retirement
Pension (RP). It was intended to act as a quasi non-contributory
retirement pension for those carers without the necessary paid
contributions from employment. ICA will cease if other conditions
are breached, eg residence and presence rules. No equivalent
concession exists in the rules governing CP which can currently
be withdrawn, in certain cases. There are no plans to alter
these rules.
(d) The existing rules produce obvious and
potentially absurd anomalies:
(e) If there is
to be no age limit to claiming, the same conditions of entitlement
without any concession have to be applied to all new claimants
regardless of age otherwise anyone over the age of 65 could claim
ICA whether or not they were carers.
(f) Under the Order transitional protection
will apply to all claimants over the age of 65 at the date of
change. This ensures not only that older ex-carers are covered
but that over 65 year olds currently still caring will be able
to continue their entitlement to ICA even if caring ceases later
on in life.
(g) It should be noted that the concession
will not be withdrawn from anyone currently entitled to
ICA - carers under 65 will carry on with the terms of entitlement
they have now, and transitional protection will apply to those
aged 65 or over.
Proposals
5. The proposed changes will
Carer Premium
6. You have advised us that the Committee
are concerned about the withdrawal of the concession in so far
as it would mean that, for those people who cease to be carers
after the age of 65, they would lose entitlement to the Carer
Premium.
"which would appear to be a significant potential
loss to an albeit small group".
It may not have been made
clear to the Committee that there is no exact equivalent to the
ICA concession for the CP. CP can be withdrawn now in certain
circumstances. Some protection is already offered - there is an
8 week run-on of CP when ICA ceases for any reason so long as
entitlement to the IRBs continues to be satisfied..
The significance of this is that, under current
rules, in those cases where ICA is no longer payable because of
the award of RP, Carer Premium can already be withdrawn - eg when
the disabled person dies, or the qualifying benefits cease, perhaps
because of a lengthy stay in hospital or admission to publicly
funded residential care. It is only in ICA that entitlement can
continue regardless of whether key entitlement criteria are still
being fulfilled.
7. The Committee is concerned about the
extent to which "losers" are protected by alternative
means of financial support. There are two aspects to this - the
size of the group, and the alternatives available.
Size of the Group
8. It is important to note that no-one
will have their existing conditions of entitlement altered at
the date of change of the law. Those under 65 have to continue
to meet the conditions of entitlement as now; those 65 and over
are protected by the transitional arrangements. A person may seek
to argue that they have anticipated having a right to continue
receiving ICA after age 65 without meeting the entitlement conditions.
The Department's view is that most people would consider that
publicly funded benefits are there for a specific purpose, and
it would be unusual if any contrary expectations are held.
9. Information about the numbers of people
aged 65+ who cease to be carers, or enter gainful employment,
is not available. This is because information can only be sought
from a claimant to benefit if it has a direct bearing on their
entitlement to benefit. Once a carer reaches 65 such information
is no longer relevant. Hence no precise estimates can be made
of the amount "spent" on the concession. No savings
have been scored up for these measures. The extension of ICA
to carers aged 65 and over is expected to cost around £35m
a year.
10. Even for those who use or could use the concession,
in very many cases the concession does not lead to financial gain.
Carers with a retirement pension which exceeds the rate of ICA,
and whose income exceeds the Minimum Income Guarantee (MIG), even
were Carer Premium still payable (see para 6 above), gain nothing
from the concession and, conversely, lose nothing from its withdrawal.
Loss of entitlement to ICA in this group would
cause no financial loss, unless they are on IS/MIG. Even then
Carer Premium is not guaranteed and has conditions attached (see
above). ICA is taken fully into account in IS/MIG.
11. The estimate of numbers of people turning
65 who would lose entitlement to ICA and/or CP under the proposals
is around 230 to 240 a year, or 5%. This accords with data which
suggests that in around 95% of cases, the disabled person still
receives the qualifying benefits, suggesting that care is in fact
continuing. Annex A refers.
No hardship should ensue. No-one is allowed to
sink below the MIG.
Alternative Provision
12. Income protection is provided by a range
of benefits including the following:
(i) Minimum Income Guarantee The
principal financial protection for pensioners is at present the
Minimum Income Guarantee (MIG), which was introduced in April
1999 and uprated) in line with earnings (at least) every year.
In April 2001, the MIG was raised by more than the planned earnings
increase, up to £92.15 for single pensioners and £140.55
for couples; and the lower capital limit doubled from £3,000
to £6,000 and the upper limit increased from £8,000
to £12,000. As a result, half a million pensioners will gain
an average of £5.40 a week. Many will be entitled to help
for the first time.
It is quite possible that the changes to the ICA
rules may alert carers and ex-carers to the existence of the MIG,
and indeed to other benefits and tax credits as they develop.
Some examples of financial effect are given in the
separate Annex.
(ii) Carer Benefits An element of protection
for changes of circumstances is already built in to the system
of carer benefits:
* CP already
has an 8 week run-on when ICA ceases, so long as entitlement to
the IRBs continues.
* One of the proposals under the RRO is
an 8 week run-on in ICA when the disabled person has died that
will run concurrently with the existing CP run-on.
* There are generous provisions to continue
ICA in cases where care has temporarily ceased, eg hospital admission,
holiday etc.
(iii) National Insurance (NI) Credits/Home
Responsibilities Protection (HRP)
As previously noted, the
concession was put into the rules when ICA began in 1976. This
was before NI Credits were awarded with benefits such as ICA to
help protect the RP entitlement of people unable to work full-time
such as carers, and prior to the HRP scheme[30].
Today's carers are not, therefore, in the same position as those
when the ICA was designed. Since 1978 ICA automatically gives
entitlement to an NI credit for each week, allowing carers to
build up entitlement to RP.
Also, the duration of ICA claims suggests that carers
are out of the employment field because of caring responsibilities
for relatively short periods of time. Over 65% of ICA claims last
less than 4 years.
(iv) State Second Pension
The Government is reforming
both the state and funded pensions to give more people the opportunity
to build up a good second pension. Carers, amongst others will
benefit from the reform of State Earnings-Related Pension Scheme
(SERPS) through the State Second Pension (S2P) to become entitled
to a second-tier pension for the first time.
In a qualifying year, carers will be treated, for
S2P purposes, as if they had earnings of £10,800 (this figure
is for 2002/03 and will be uprated in line with increases in national
average earnings). Carers will start to build entitlement to an
additional pension for the first time - worth about £1 a
week extra pension for every full qualifying year at today's rates.
Up to 400,000 ICA recipients will start to build up entitlement
to S2P from the start of the scheme in April 2002.
Proposed repeal of Section 70(6)
13. The Committee have asked why section 70(6)
is being repealed rather than repealing the existing regulations
made under the subsection. The Department does not intend to use
these powers again it would be an unusual use of a power to leave
it on the statute book if there was no intention to exercise it.
The Government is not persuaded by the comments of respondents
to the consultation mentioned in your letter, that the section
should not be repealed because:
(i) Concern over hardship
The Department is of the
view that it is not necessary to retain section 70(6) to prevent
hardship. The MIG offers a safety net to prevent hardship (as
did Income Support, prior to MIG), so that no ex-carer who loses
entitlement to ICA will sink below the relevant MIG level, as
indicated by the examples in the Annex.
(ii) Why not introduce the concession at a
later age?
Introducing the concession
at an age later than 65 would reintroduce the anomaly, outlined
at para 4(d), whereby two carers of the same age were treated
differently depending on the age at which they became entitled
to ICA. If, for example, the limit was set at 70, new claims made
after that age would have to be subject to the caring conditions,
(otherwise any 70 year old could claim the benefit). At the same
time, another person who claimed the day before their 70th
birthday and immediately ceased caring could invoke the concession
and ICA entitlement would continue to an ex-carer indefinitely.
No matter where the age limit is set there will continue to be
inequality.
Drafting Suggestions
14. * Thank you for pointing out the omission
in the recital. This will be amended.
* With respect to the
reference to subsections 1(a) to (c) in Article 4 of the Order,
it was considered that, as paragraph (c) stands and falls with
paragraph (a) (which is being referred to), there is no reason
not to mention paragraph (c). If the reason for not mentioning
paragraph (c) is that it cannot be satisfied, there would equally
be no reason to mention paragraph (a) as the preceding words in
article 4 ("...notwithstanding that he is not caring for
a severely disabled person...") must mean that paragraph
(a) cannot be satisfied either. However, the Department will be
happy to substitute a reference to subsection "1(a) or (b)"
if the Committee considers it preferable to the current reference.
Reference to the Social Security Advisory Committee
15. Finally, the issue of whether the Order should
have been referred to SSAC has been raised. Section 172 of the
Administration Act 1992 requires the Secretary of State to refer
regulations being made under relevant enactments to SSAC. The
relevant enactments are listed in section 170 of that Act and
do not include the Regulatory Reform Act 2001, so referral of
the draft order to SSAC is not required. There will be regulations
consequential upon the RRO and these will be referred to SSAC
for consideration in due course. The Committee may like to know
that, although the Order does not require SSAC referral, SSAC
was included by the Department in the consultation process on
the Order. SSAC did not comment on the proposals at that stage.
Summary
16. The Committee has raised a number of issues
surrounding the introduction of changes to the ICA rules allowing
people aged 65 and over to claim for the first time. The main
point of contention is the repeal of section 70(6) of the Contributions
and Benefits Act 1992 which removes the concession whereby carers
aged 65 or over no longer have to meet certain conditions to continue
their entitlement to ICA.
17. The Department's view is that the benefits
to be gained by relaxation of the age limit to allow older carers
to claim ICA for the first time (and thereby gain access to CP)
will greatly outweigh any loss to carers caused by removal of
the concession. All those aged 65 or over at the date the law
changes will be protected and will be able to continue to use,
or begin using these concessions until the end of their claim.
The anomaly referred to at paras 5 and 6 will also be removed.
Moreover, the structure and integrity of ICA as a benefit will
be strengthened, to the general advantage of carers, because it
will from now on have a uniform set of entitlement conditions
at all ages above 16, which will provide greater clarity and certainty
about its purpose.
18. In proposing to extend entitlement to new
carers aged 65 and over, the need to address the anomalies created
by S70(2) is an essential consequence. Not to do so could potentially
result in anyone aged 65 or over being able to claim a carer benefit,
irrespective of whether they had any caring responsibilities.
19. For those carers, aged under 65 at the changeover,
their conditions of entitlement will not be changed, merely that
they will have to continue to meet them throughout their claim.
20. For carers who cease caring and whose ICA
and/or CP thereby ceases, there is a range of benefits to act
as a safety net, or in the case of working carers, to provide
in-work assistance, eg Working Families Tax Credit. With this
in mind, the Department feels that adequate alternative provision
is in place.
Marion Hutt
Disability and Carer Benefits 4
DWP
30 The HRP scheme reduces the number of years of contributions
necessary to establish title to RP for, amongst others, non-ICA
recipients providing care to disabled people. Back
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