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Public Bill Committee Debates
Employment and Support Allowance (Consequential Provisions) (No. 2) Regulations 2008

The Committee consisted of the following Members:

Chairman: Mr. David Amess
Duddridge, James (Rochford and Southend, East) (Con)
Gerrard, Mr. Neil (Walthamstow) (Lab)
Gilroy, Linda (Plymouth, Sutton) (Lab/Co-op)
Harper, Mr. Mark (Forest of Dean) (Con)
Howell, John (Henley) (Con)
Ingram, Mr. Adam (East Kilbride, Strathaven and Lesmahagow) (Lab)
Jones, Helen (Warrington, North) (Lab)
Kidney, Mr. David (Stafford) (Lab)
Ladyman, Dr. Stephen (South Thanet) (Lab)
Rowen, Paul (Rochdale) (LD)
Scott, Mr. Lee (Ilford, North) (Con)
Shaw, Jonathan (Parliamentary Under-Secretary of State for Work and Pensions)
Strang, Dr. Gavin (Edinburgh, East) (Lab)
Tredinnick, David (Bosworth) (Con)
Willott, Jenny (Cardiff, Central) (LD)
Wilson, Phil (Sedgefield) (Lab)
John Benger, Mick Hillyard, Committee Clerks
† attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
Burns, Mr. Simon (West Chelmsford) (Con)
Penning, Mike (Hemel Hempstead) (Con)
Penrose, John (Weston-super-Mare) (Con)
Stuart, Mr. Graham (Beverley and Holderness) (Con)
Timpson, Mr. Edward (Crewe and Nantwich) (Con)
Walker, Mr. Charles (Broxbourne) (Con)

First Delegated Legislation Committee

Monday 13 October 2008

[Mr. David Amess in the Chair]

Employment and Support Allowance (Consequential Provisions) (No. 2) Regulations 2008

4.30 pm
Jenny Willott (Cardiff, Central) (LD): I beg to move,
That the Committee has considered the Employment and Support Allowance (Consequential Provisions) (No.2) Regulations 2008 (S.I. 2008, No. 1554).
It is a pleasure to join so many Members on the Opposition Benches in Committee on a Monday afternoon—it is a little unusual.
Our main concern about the regulations is that they seem to entrench further the discrepancies between the employment support allowance available on a contributions basis and that available on an income basis. The ESA means that this is the first time that someone who has worked and built up a contributions history or who has been disabled from an early age and therefore has an automatic right to sickness benefits will be significantly worse off than someone who has no contributions history and has not paid national insurance contributions. The other ESA regulations that have already been made have set that in progress, so the income-based ESA now has advantages that the contributions-based ESA does not. For example, ESA(C), which is based on contributions, is taxable and counts as income for tax credit purposes, but none of those applies to income-based ESA. Contributions-based ESA is subject to separate means-testing for housing benefit, council tax benefit and health and legal costs, all of which are automatically passported for income-based ESA.
The rules relating to permitted work are also totally different: those on the contributions-based ESA lose their housing benefit and council tax benefit at a steep taper rate after only a small amount of permitted work, but those rules do not apply to the income-based ESA. Those on the contributions-based ESA also have less chance for benefits such as free travel passes, relief from charges for pest control or for libraries. Those might seem quite minor, but to those living on a very low income, the crisis caused by having to pay a relatively minor sum for getting rid of rats can tip them over the edge.
Those who receive contributions-based ESA are also not entitled to access the social fund, which is a further disadvantage. Will the Minister let us know whether it would be possible to grant access to the social fund for those on the contributions-based ESA, and if not, why not? Have the Government considered the possibility of a £1 disregard for those on contributions-based ESA so that they would be considered in the same way as those on income-based ESA and could be passported through to the various benefits? That would also be much more efficient for the Government, as they would not have to pay for and administer large numbers of means tests for housing benefit, council tax benefit and all the additional health and legal costs. In the long run, it would be more efficient for the Government.
The regulations add further to the discrepancies between these two categories of recipient. Regulation 2(3) will ensure that the benefits received by those on contributions-based ESA are treated as income for their partner’s income support claim, which is not the case for those on income-based ESA. Will the Minister explain why those who have paid their national insurance contributions and have to receive ESA(C) are being treated differently, even if their partner is eligible for income support, which suggests that the family has a low income? That seems to be a slightly unfair discrepancy.
Regulations 2(7) and 3(16) relate to people on the contributions-based ESA who are sanctioned. The amendment under regulation 2 relates to whether such a person has a partner on income support and the amendment under regulation 3 to whether they have a partner on jobseeker’s allowance. The partner’s income support or JSA will be based on the full amount of the recipient’s ESA claim, even if it has been sanctioned. I will be grateful if the Minister clarifies what will happen if that person is on income-related ESA rather than contributions-based ESA. Can they also be sanctioned? If they are, the regulations suggest that the income support and JSA calculations will take into account the reduced amount of ESA if it is income related, but the full amount if it is contributions based. That seems to be an unfair discrepancy. Will the Minister clarify that matter?
Another area where there is increasingly a discrepancy is when somebody has been convicted of two instances of benefit fraud in three years. I would like to make it clear that I am not condoning benefit fraud. However, there seems to be a discrepancy in the regulations between how the recipients of the two types of ESA will be treated in such circumstances. If members of an offender’s family are entitled to income support or income-based JSA, their housing benefit and council tax benefit are protected when they enter a disqualification period and they have their benefit sanctioned. The regulations suggest that income-based ESA will be included in that category so that housing benefit and council tax benefit are protected for the duration of the sanctioned benefits, but that those who receive contributions-based ESA will not receive that protection. Their housing benefit and council tax benefit could therefore be affected. Two individuals with exactly the same income and savings could be treated very differently in those circumstances. Will the Minister clarify whether that is the case and whether anything further can be done to ensure that there is equality between the different groups?
I referred earlier to the social fund. The previous regulations on the ESA set out that access to the social fund is not available for contributions-based ESA recipients. Part 3 of today’s regulations adds to the passported benefits or to the benefits that are available for those receiving ESA(IR), as distinct from those receiving ESA(C). Will the Minister clarify whether the Department has considered basing that matter on a person’s income rather than the exact benefit that they receive? Some people could be significantly worse off as a result of the regulations.
The other issues that I want to raise concern the explanatory notes, which mention communication and information that has been shared. The regulations are extremely complicated, as is the new benefit. I have put down a number of parliamentary questions over the past few months about the training that has been made available for staff in jobcentres. I have a number of concerns about the paucity of training that has been rolled out. Given the complexity of the system, I am concerned that people in Jobcentre Plus are not fully prepared. That relates not just to incapacity benefit personal advisers who will implement the regulations, but to the people who will deal with those who fall out of the system. If increasing numbers of people do not pass the work capability assessment, people who would otherwise have fallen into this category will be passed to other staff in Jobcentre Plus. Will the Minister clarify what training has been carried out for staff in jobcentres, including those working in incapacity and those working in other customer-facing areas?
It is clear from the regulations that most, if not all, of the applications for the new ESA are expected to be made by telephone. Will the Minister confirm what training has been carried out for telephony staff who will be taking those applications, given the complexity of the system? Finally, the regulations mention GP surgeries and other people who will have a tangential link to this move. Clearly, GPs and other medical professionals are going to be asked for information and evidence to back up or provide support for people’s ESA claims, so I would be grateful if the Minister clarified what information has been given out and what communication has taken place with them, and what is expected in the next 12 months while the changes are introduced to ensure that the medical profession is brought up to speed on the changes.
I do not intend to vote against the regulations, but I have a number of concerns about these complicated measures, and I would be grateful if the Minister addressed them.
4.40 pm
Mr. Neil Gerrard (Walthamstow) (Lab): I will be brief, because we want a regime that is about getting people into work. As we know, for far too long, once a person is on incapacity benefit—it was never intended to be a long-term benefit—they stay on it for years. Statistics say that people who have been on incapacity benefit for a period of time are more likely to die than to get back into work. Clearly, the system ought not to function in that way. When people find themselves on incapacity benefit, too little is being done to help them off it and into work.
The general shift in how we deal with people who need to be supported when they are unable to work is right, but—I shall not labour this point because it has been made—there are some anomalies in the new measures. In particular, there is a contrast between income-based ESA and contribution-based ESA. If some of the figures that I have been told are correct, we ought to address that. Let us consider, for example, two people who are in the same situation, who have no other income apart from ESA and no savings, who do permitted work. Under the present system, someone who receives incapacity benefit and earns the maximum that they can from permitted work will end up with a total income of about £189 a week. Someone on income-based benefits rather than contribution-based benefits would be about £8 a week worse off than that. If what I have been told about the new system is correct, someone who is on income-based ESA will get £84.50 ESA, £70 a week earnings, and passported housing and council tax benefit of £75 a week, which adds up to £229.50.
On the other hand, somebody who is on the contribution-based ESA—in other words, they will have been in work and paying contributions in the past—will get the same £84.50 ESA and £70 from earnings. However, because of the difference in how their earnings are treated, they will get only £32.50 in housing and council tax benefit, and end up £42.50 a week worse off, which seems anomalous. The problem is solvable. It arises from how we treat the incomes of those two people.
The same issues apply to passporting. Some benefits will not be available to those on income-based rather than contribution-based JSA. They will have to go through means tests again to get housing benefit, council tax benefit and so on. As has been said, that will just generate work, and it will probably mean that some people entitled to those benefits will end up not claiming them because they do not realise that they must make a separate application. They will end up not applying, or applying late, and they will have arrears that cannot be fully backdated.
We could deal with that: probably not within these regulations, but by making fairly minor changes to the housing benefit and council tax regulations. That would be a simple mechanism for dealing with the issue of a means test. We think that it ought to be possible and not beyond the wit of man to say, “Here is a person who’s getting contribution-based ESA, but who clearly ought to qualify through means-testing for the same level of support as someone on income-based.” A small disregard—a small change to the housing benefit and council tax regulations to alter how income is regarded—would be a simple way to deal with that.
I know that the regime will apply only to new claimants, but it will undoubtedly also apply to some people currently on incapacity benefit or income support who come off benefits and then go back on at some future point. It will be extremely difficult to explain why one of two people who, on paper, are in the same situation regarding resources, gets significantly more money a week than the other. That is the sort of thing that we will undoubtedly face. People will turn up in our constituency surgeries wanting to know why they are getting £40 a week less than someone they know with exactly the same resources.
As I said, I do not think that the problems are insoluble. They could be dealt with by making relatively minor changes to regulations—if not to these regulations, to housing benefit and council tax benefit regulations—to remove the anomalies. The system attempts to give much better support through jobcentres to people on incapacity benefit who are capable, with the right support, of going back to work. It would be a shame, in moving to a system that will be better for many people, to leave those anomalies between two groups of people.
4.47 pm
The hon. Member for Walthamstow raised some pertinent issues that I shall return to in my remarks. If he does not receive an assurance from the Minister that the anomalies that he highlighted will be changed in future regulations, it sounds from the logic of his argument as though he ought to vote against them. I am sure that the Minister will take on board that criticism from his own party. It was powerful, and I am sure that he has taken note of it.
Before I step through the detail, it is worth saying at the beginning, to avoid doubt, that we welcome the introduction of the employment and support allowance. As the hon. Member for Walthamstow mentioned, the previous system focused too much on what people could not do and not enough on what they could. The introduction of the work capability assessment, which focuses on what people can do, is a step forward, along with the employment and support allowance. That is why we support the measures and the big picture. It is also very helpful that the Government are expanding the Pathways to Work programme, which will, obviously, pick up many of the people on the employment and support allowance.
It is worth saying—and this is of course the reason why we debate such regulations in detail in Committee—that although we can all agree on the principle and although we welcome the employment and support allowance and the direction of the broad proposals, it is important that the detail of the regulations to implement them should do what Ministers intend and what those of us who support the broad policy direction thought Ministers intended or had set out. It is in that respect, of course, that we want to watch out for one or two things.
One way in which we want to help Ministers is in being careful about the fact that there have been one or two slip-ups recently, such as with the 10p tax rate. With the best will in the world, Ministers have introduced measures that have inadvertently damaged the interests of some of the poorest and most vulnerable people in our communities. The Prime Minister said that he wants to put his hand up when there are mistakes and to put them right. It is important to focus on the detail to ensure that such mistakes are not made again.
Part 2 of the regulations is a big section about income-related benefits, and the hon. Members for Cardiff, Central and for Walthamstow have touched on them. It would be helpful if the Minister could clarify the rates of ESA that will be paid. When the overarching principle was debated during the passage of the Welfare Reform Act 2007, Ministers said that the rates of ESA would be above the present long-term incapacity benefit rates. Without trying your patience, Mr. Amess, I shall use only one or two examples of such statements by Ministers.
“In respect of new ESA customers the commitment will be above the present long-term IBA rate”.——[Official Report, Welfare Reform Public Bill Committee, 17 October 2006; c. 57.]
In other words, although no one is losing out under the measure, because existing claimants will not be moved to the new benefit, there may be two individuals in the same circumstances, one of whom is an existing incapacity benefit claimant and one of whom is a new claimant for employment support allowance, and the clear message given by Ministers, when the Welfare Reform Act 2007 and previous regulations were going through Parliament, was that those who go on to ESA would get more money than if they had been on incapacity benefit. That, of course, has turned out not to be the case.
The Disability Benefits Consortium, in a briefing note for an evidence-taking sitting of the Select Committee on Work and Pensions on 2 July, made it clear that it believed that the current proposals
“do not fulfil important commitments and reassurances”
given to them and to parliamentarians. The consortium thinks that the proposals are
“contrary to the specific policy objectives”
of Ministers—that the regulations do not do what it says on the tin.
The Child Poverty Action Group, in another briefing note for the Select Committee, said that it was concerned that the Government had
“not met the spirit of its own commitments made, firstly in consultation and then in Parliament, regarding the rates of ESA, and that many claimants will in fact be worse off under ESA than they would be under the existing system.”
It said—this is important when we consider Ministers’ responses—that it believed that
“no person would reasonably have taken those statements to imply...a comparison between the rate of a benefit introduced in 2008 with the rate of a benefit that applied in 2006.”
It said:
“We believe the statements, if they did indeed relate to such a comparison, to have been culpably misleading.”
In the House, we absolutely do not like Ministers to go around doing any misleading, and we are not allowed to draw attention to examples in which we think that that has been the case.
John Penrose (Weston-super-Mare) (Con): As a member of the Select Committee, may I reassure my hon. Friend that it is a question not just of the precise words used by Ministers at different points, but of the underlying policy objective that they were trying to set out in those meetings. A central one, about which they were very clear, was that it does not make sense for a current long-term incapacity benefit claimant to have a disincentive to take a job, because they know that there is a risk that, if they lose the job six or 12 months down the road, they will go back on to employment and support allowance at a lower rate. That is clearly contrary to the Government’s objectives and those of everyone who has supported the principle of the legislation. Therefore, it is a question not just of the specific words, important though they are, but of the principle underlying them, which made it clear what was intended.
Mr. Harper: I am grateful to my hon. Friend for pointing that out. Indeed, he is right: if we do not get this right, we will create a whole set of unforeseen consequences. There will be unfortunate incentives for people who will not want to take the chance to get a job and come off incapacity benefit for fear of going on to a new benefit in future at a lower rate. The Government have accepted some of those criticisms. On 2 July, the former Minister of State for Work and Pensions, the current Financial Secretary to the Treasury, the right hon. Member for East Ham (Mr. Timms) told the Work and Pensions Committee:
“There are people - and I am sure you will give me some examples - who would have received more on a given week if we still had IB than they will on ESA.”
Later in his evidence he said:
“There certainly are some people who would be worse off by that amount under the current arrangements.”
Some of the changes to the income levels of ESA under the regulations will have those negative consequences. It would be helpful if the Minister explained why, despite the promises that were given to Parliament, both in the passage of the 2007 Act and in previous sets of regulations, and the general principles of the regulations and the ESA, there will be that negative outcome.
I should like to refer to the specific case of those on income support with disability premium, which is covered in part 2 of the regulations. Single claimants of employment support allowance will receive £1.85 a week less than a current claimant of income support with the disability premium. The Government admitted last November that more than 1.1 million people were in receipt of income support with the disability premium. That is a good example of how many people could be affected by a drop in benefits if they changed from one benefit to the other.
Members of the Committee may not think £1.85 a week is a great deal of money, but for those living on a very low income, particularly facing increased costs of living and increased energy bills, a drop of £1.85 week may be quite significant. Moreover, Ministers have said that the rates of ESA would be higher than the equivalent benefits. The Minister should therefore explain why he is comfortable with that situation, particularly as, although not immediately but over a period, this set of benefits could affect more than 1 million people. That is a significant number.
Mr. Graham Stuart (Beverley and Holderness) (Con): Does my hon. Friend share my disbelief that Labour Members could plan to support regulations under which disabled people who try to go into work, which seems to be central to Government policy and has support across the House, would have their income reduced if they were come out of work after that proper and brave attempt to find employment?
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