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Lord Swinfen: I am delighted to hear my noble friend say that a disabled person or someone in receipt of community care will be able to receive a grant through an agent acting on his or her behalf who can be dismissed by them should they feel that the agent is not doing what they want. I quite understand that my noble friend cannot, without reference to a list and details of all existing schemes, say that they will continue to be legal in the future. We know that some of them are tolerated, even though they are not within the strict letter of the law, because they are experimental. They have been tolerated by local authorities, voluntary organisations and by my noble friend's own department. The mere fact that, like anyone else, someone in receipt of community care can dismiss an agent and employ another one, in exactly the same way as we could a solicitor if we did not like his or her work, is extremely welcome.

Baroness Hollis of Heigham: We shall have to take advice on this matter to see whether the Minister's answer meets our concerns. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 10:

Page 1, line 15, at end insert--
("( ) Regulations shall provide for any such payment by the authority to be disregarded in the assessment of income-related benefits provided under section 123 of the Social Security Contributions and Benefits Act.").

The noble Baroness said: In this amendment we return to an issue raised at Second Reading--

Baroness Trumpington: Is the noble Baroness speaking also to Amendment No. 18, grouped with this one?

Baroness Hollis of Heigham: I apologise to the Committee. In moving this amendment, I also speak to Amendment No. 18.

Again, this is a probing amendment. I hope it is unnecessary in the light of the Minister's remarks at Second Reading and the consultative document. Again, it would be very helpful to have a response on the record.

We seek to ensure, since a direct payment turns a service into cash, that that cash should not then be taken into account when assessing eligibility for the ordinary social security benefits, whether income support, housing benefit, council tax benefit or whatever. Clearly, if one were in receipt of a service,

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it would not be taken into account. If one were in receipt of cash, it could be, since it is a form of income.

The Minister made clear at Second Reading, and in the consultative document, that such payments would be disregarded. Payments from the ILF are disregarded. We want the Minister's assurance on this point, not because we doubt her benign intent but because, bluntly, we want to bind, as far as we can, any future Minister to honour that commitment. I beg to move.

Lord Jenkin of Roding: I intervene only to ask whether my noble friend can possibly say a sentence or two about the new child support "Departures" scheme referred to in paragraph 43 of the consultative document dealing with social security benefits, which is the subject of this amendment. It would be very helpful if my noble friend could let us know what is involved in that.

Baroness Cumberlege: We have already made clear that direct payments will not be counted as income for the purposes of assessment of benefit entitlement. Benefits will continue to be paid on the same basis to disabled people, whether they choose services or cash payments in lieu of services, from their social services department. Nor would the benefits of a third party receiving payments on someone else's behalf be affected so long as the payments were spent entirely on purchasing services for that person.

The Government have given a firm commitment that, when necessary, social security regulations will be amended to provide for equal treatment between service users and direct payment recipients. That is the appropriate way of avoiding any unintentional effect on direct payment recipients' entitlement to benefits. It is unnecessary and cumbersome to seek to do so by amending this Bill.

Perhaps this may be helpful to my noble friend in reply to his point about child support. The child support maintenance formula will fully disregard direct payments. (I am not quite sure that that is what my noble friend seeks.) The child support departures scheme will take account of any direct payments in broadly the same way as it would have regard to community care services.

I am aware that that is an inadequate answer. I will write to my noble friend.

Baroness Hollis of Heigham: I think the Minister's consultative document confirms the answer that she just gave to the noble Lord, Lord Jenkin. We are very pleased with the Minister's answer and I happily beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Tordoff): In calling Amendment No. 11, I draw the attention of the Committee to the fact that, were this to be agreed to, I should not be able to call Amendment No. 12.

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5.15 p.m.

Baroness Hollis of Heigham moved Amendment No. 11:

Page 1, line 18, leave out from ("authority") to end of line 19 and insert ("shall, in determining how much to pay to a person under that subsection, not require him to contribute more than it appears to the authority that it is reasonably practicable for him to contribute.").

The noble Baroness said: I apologise to the Committee for revisiting an issue in relation to which the Minister appeared to make the Government's views clear, but it is perhaps a little more complicated than it might seem. The same charging policy within local authorities which currently applies to services should also apply to direct payments--so if a service is free there should be no means testing for its equivalent service when translated into a direct payment. If there is a banded charge for services, a banded charge should be offset against direct payments; if it is means-tested, it should be means-tested. We are asking for a level playing field within each local authority. Clearly, local authorities will differ. Obviously, if resources permitted, we should all like such services to be free and no deductions to be made from direct payments. But that is not the real world, and we want to ensure a level playing field.

In her reply the Minister seemed to suggest that that is what the Government intended and expected would happen. In that case we are puzzled by the words on the face of the Bill. Perhaps our advice is wrong, but it seems to us that the words on the face of the Bill do not deliver that. They appear to apply harsher financial criteria to direct payments than is the existing case for services.

Perhaps I may give a little of what I understand to be the technical background. The power of a local authority to charge for services was formalised in Section 17 of the Health and Social Services and Social Security Adjudications Act 1983, which provides that where a local authority is satisfied that a person's means are,

    "insufficient for it to be reasonably practicable for him to pay for the service",

he should not be required to pay more than,

    "it is reasonably practicable for him to pay".

In other words, the test now for any charging policy on services is one of reasonable practicability. But that phrasing, "reasonably practicable", has not been reproduced in the Bill. Instead, there is the harsher, more stringent criterion,

    "have regard to his financial circumstances".

Even if a service was free, having regard to financial circumstances must mean that a person's situation must be means tested, whether you want to or not. Otherwise, it can have no meaning. "Have regard to his financial circumstances" must mean that at each and every point you must test for financial circumstances; namely, apply a means test.

Therefore we believe that by having different wording for the financial criteria applied to services at the moment and for direct payments on the face of this Bill introduces the possibility that there will not be the level playing field that the Minister, and we, want. Will the

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Minister please reconsider the wording? Will she apply the wording that currently applies to services, to direct payments, thus making it transparently clear that there is a level playing field?

On an additional point, I understand that, should there be a dispute about the level of the charge, at present the local authority continues to provide the service until a dispute is resolved. Is it the Government's expectation that a similar response will apply to a dispute over direct payments? This is quite a difficult area. We hope that the Government will give us a clear reply now and perhaps, if necessary, follow it up with authoritative guidance as to what constitutes disability-related expenditure and how it may be verified. I beg to move.

Lord Jenkin of Roding: I am not quite clear whether it is appropriate for me to raise my point on this or the next amendment. However, I feel that I should raise it at this juncture. It is about the liability of the recipient of a direct payment to pay VAT on the bills that might be submitted for personal services contracted for. For the local authority, there is no VAT to pay in respect of services which they provide, because it is a service in kind. But let us suppose that a disabled person purchases personal services from a firm supplying people to give personal support. If that firm's total turnover is above the level of about £45,000, which is the present level, it is obliged to charge VAT.

I understand that health services specifically are exempted and always have been exempted from any charge for VAT. There have been continuing arguments in another place--I daresay echoes have been heard in this Chamber--about VAT on appliances and other aids to help disabled people. But I am not clear on what happens about a firm which may provide personal services and may undertake to supply someone for three hours a day for five days a week, for example, to a disabled person to help with personal care and so on, sending someone in in the morning and again in the evening to help them get up and go to bed. If that firm is registered for VAT, will the payments be chargeable to VAT and will the disabled person have to pay it?

If the answer is yes, the question which follows from that is whether the direct payments which will be made by the local authority will be sufficient to cover the VAT as well as the direct cost of the service being supplied by the firm. It seems to me that in some circumstances people will face a choice: either they can employ someone, in which case, as we discussed earlier, they will land themselves with problems of national insurance and PAYE if the hours come above the minimum; or they can contract with a firm--or indeed a self-employed person--and pay them the sum gross. But if that person--it is more likely to be a firm, simply because of the nature of the work--has a turnover above the threshold limit for VAT, that person will have to charge VAT because he himself would be charged it by the Customs and Excise.

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I hope that I have spoken for long enough to enable my noble friend to locate the answer to that question, in which she knows that I am interested and that I may now sit down.

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