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Baroness Hollis of Heigham moved Amendment No. 26:

Page 1, line 27, at end insert--
("( ) Each local authority shall consult with users of direct payments for the purpose of preparing a plan for community care services under section 46 of the National Health Service Act 1990, and produce an annual report on the progress of direct payments schemes which includes monitoring of Independent Living Fund expenditure within that authority.").

The noble Baroness said: Amendment No. 26 is a three-part amendment. Perhaps I may explain the reason for each part.

First, the amendment seeks consultation on the development of the direct payments schemes. It is clear from the Policy Studies Institute 1994 study, which has been quoted, of existing indirect payments schemes that the schemes that work best are those which are constructed in consultation with disabled people. The report shows that such full consultation is successful because the outline and shape of the direct payments scheme will be most relevant if user groups can influence its design, cutting out unnecessary waste and procedures. Equally, that will allow for a tailormade scheme in each area, which will reflect local circumstances. Such schemes, constructed in a spirit of partnership, will be more robust and any problems that emerge will be resolved in a more co-operative manner. Therefore, we believe that full consultation is especially important in constructing new direct payments schemes, categories of client need and the like.

The second reason for the amendment is more oblique. It is not compulsory for local authorities to establish direct payments schemes. They are permissive. We have accepted the Minister's position in that respect for the time being. In the absence of a mandatory requirement on local authorities to establish direct payments schemes, we believe that it would help and encourage local authorities to develop such schemes if they were required to report to the Department of Health on how they were proceeding to meet the needs of disabled people and independent and community living. By asking them to report, it would allow us to map progress on a national basis. It would allow local social services committees to receive a progress report. It would allow disabled people to monitor how their local authority was proceeding in implementing the new legislation. I suggest that such monitoring should take place annually for about three years, after which there could be, if you like, a sunset review. The pump would have been primed for establishing such schemes.

The first reason for asking for progress reports is that consultation is a good thing. The second reason is to encourage local authorities to establish such schemes in the absence of those schemes being mandatory. A third is to monitor the use of funds provided to local authorities following the termination--the sunset clause--of the original ILF moneys of November 1992. At that time a sum of just under £100 million--usually referred to as the Independent Living Transfer--was transferred over three years to local authorities to assist severely disabled people. That period of transfer came

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to an end in 1995-96, but the total amount has been included in the standard spending assessment for local authorities from 1996-97.

We would welcome the fact that any such report monitors the expenditure of this transferred fund in order to ensure that the money continues to be spent for the purposes for which it was originally intended, to ensure that there is clear accountability for the use of such funds and to secure, where appropriate, that such a transfer element might well provide the backbone of direct payment schemes.

We consider that the amendment would do three things: it would involve local people in constructing direct payment schemes; it would ensure that local authorities which may not have adopted such a scheme were encouraged to do so by being required to report on progress; and it would keep a monitoring eye on the Independent Living Transfer Fund. I beg to move.

Baroness Cumberlege: I thank the noble Baroness for that clear explanation. We agree that consulting users and carers and providing them with information are extremely important. The Government have consistently stressed that, and it is a major component of our community care development programme, Building Partnerships for Success.

We have said that we want to see local authorities involving users and carers, not just in discussing issues that affect them personally but in looking strategically at the way in which community care is implemented. That will apply equally to the way in which this direct payments legislation is implemented.

We issued last year revised guidance on the production of community care plans which stressed that users and carers need to be more fully engaged in drawing up plans and that plans need to reflect their views. The same guidance said that community care plans should include service developments and how they will be implemented. Again, that will of course cover direct payments once this legislation is in force.

We would expect local authorities to put information on direct payments into their community care charters, and I do not therefore see a need for a duty to publish a report.

I also see a problem with authorities being required to include information on Independent Living Fund expenditure, as they would not necessarily have this information available.

We have already tackled the issue of consultation and information and consider that the amendment is therefore unnecessary. I hope that the noble Baroness will not press it.

Baroness Hollis of Heigham: Perhaps I may ask the Minister to say a little more about the second part of the three-pronged push on the amendment. I take her first point, that disabled people will be involved in constructing the plans. However, we referred to monitoring and I asked for progress reports. I believe that the Minister said that local authorities are required to publish community care progress reports and that direct payments could--I do not think that she said "must"; it is the point I press--be included in that. If

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the Minister assures me that guidance to local authorities will indicate that in the community care progress reports local authorities will be expected to address the issue of direct payments schemes, I shall be well content. Can the Minister give me that assurance?

Baroness Cumberlege: We go back to basic principles: that the direct payments legislation, if enacted, is part and parcel of the community care legislation of 1990. Where we look for progress reports from local authorities, I would consider direct payments as being part of those annual reports.

Baroness Hollis of Heigham: What happens if a local authority decides not to set up a direct payments scheme and does not have a third party or voluntary organisation doing so? Particular circumstances may well apply to that local authority. There may be good reason why that local authority is reluctant to set up such a scheme. It is clear from consultation that 90 per cent. of local authorities would set up such a scheme tomorrow if they considered it legal. However, for 10 per cent. there may be pressure of circumstances, lack of inhouse expertise or a wish to wait for a year or two and to piggy-back off other people's experience. I can conceive of circumstances in which a local authority may not set up a direct payments scheme with the speed that disabled people, voluntary organisations and indeed the Minister wish.

If local authorities are not required to set up the scheme--I accept that discretion for local authorities--and if they are not required to report on the moves that they are making towards such a scheme, how can we hope, expect and check that they will do so?

Baroness Cumberlege: At this moment, I believe that all Members of the Committee are in agreement that we should like to see the direct payments scheme introduced as widely as possible. However, as the noble Baroness said, there may be instances where it is not appropriate for the social services department to set up the scheme. I anticipate that when social services report through their community care charters, the impact of that will be seen on the remainder of their report. Therefore one can see the whole matter as a package.

Baroness Hollis of Heigham: There is no point in pressing the amendment at present. However, I shall follow up the line that the Minister indicates. If what she says meets the purpose of the amendment, we shall be delighted. I am not persuaded that it does. But if necessary we shall return to the issue at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Swinfen moved Amendment No. 27:

Page 1, line 27, at end insert--
("( ) Regulations shall provide for any amount of a cash payment to be calculated in such a way as will include all such costs as are reasonable to allow the person to act as a good employer.").

The noble Lord said: In the consultation paper on the Bill, paragraph 35 on support services states:

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    "Where people prefer to employ someone as a care assistant then of course they would take on responsibility as an employer for tax, National Insurance and other liabilities".

The purpose of the amendment is to ensure that payments can include elements for value added tax, national insurance contributions, tax, advertising and all the expenses of employing someone else.

The Independent Living Fund or social services indirect payment schemes have never had the same financial commitment enjoyed by equivalent services provided by the statutory services. I am advised that in Hampshire the cost of an hour of care attendant service is approximately twice as much as the cost of an equivalent indirect payment. There is no logic to this other than that disabled people accepted much lower payments when the schemes originated because they were only too willing to have the opportunity to break free from direct services.

By and large, one encounters similar overheads in managing one's own care as those experienced by a larger organisation in establishing similar provisions. If one is running a small business and hiring and maintaining staff, costs such as sickness and holiday pay, insurance, recruitment, accountant and possible payroll support, and employers' national insurance contributions must all be taken into account in addition to the hourly rate. In most cases the hourly rate and a small amount of holiday/sick pay is all that is presently offered to the user.

I understand from the British Council of Organisations of Disabled People that some indirect payments users from around the country are finding the funding situation inadequate. I have two examples. I am sure that this applies possibly to the majority of users and not just those whom I quote. A user in Oxford states:

    "I am funded for 24 hours, 7 days per week by the original ILF. This covers a basic salary for somebody working 6 days live in and one day covered by a local agency. It does not cover the National Insurance I pay as an employer or the costs of covering my live in worker's illness. I cannot give my full time worker a paid holiday and it certainly does not meet the cost of assistance over Christmas, Easter etc. when people expect time and a half. My other main difficulty concerns the recruitment of staff; this happens approximately four times a year and costs between £60 and £200. My needs would probably be met with a further £1500 a year. Much less than Social Service Homecare overheads, but over £1000 more than I can scrape from my personal finances!"

Another disabled person receiving grants in the Bognor Regis area writes:

    "I have no spare money to meet the extra employment costs demanded by Tax and [national insurance contributions]. All I need is an extra £400 per year added to my care package to ensure my legal requirement as an employer is adhered to. The Authorities say I must find that out of my care component of the Disability Living Allowance, but that is more than taken up by my hidden disability costs of extra heating, lighting and food bills of my live in personal assistants. I have no means to meet these extra costs".

Those quotes reflect well the position of countless payment users up and down the country who feel quite distraught about being forced into bad employment practice due to inadequately calculated funding requirements. The reputation of the user is at stake and, of course, the quality of the provision will suffer if this employment costs issue is not addressed. If adequate

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indirect payments are not made, the service user will be forced to compromise on whom they can recruit. Even worse, some may be forced, for survival reasons, to submit to the temptation to cut corners in the respect of poor fiscal and legal practices, such as perhaps being less than honest about tax and national insurance, having inadequate employers' insurance and public liability insurance policies and as regards matters to do with terms and conditions, hours of overtime, sick pay and so on. I am sure that the Government would want to encourage none of those things.

That would lead people into severe difficulties. Unfortunately, some beneficiaries of the original Independent Living Fund have already run into major problems with the Inland Revenue. The Disablement Income Group is currently involved with two of those cases where unpaid tax and national insurance contributions have run into several thousands of pounds. In both cases, neither tax nor national insurance contributions were deducted from the personal assistants' wages nor were employers' contributions paid. The Inland Revenue is now threatening action for recovery of outstanding amounts, in one case almost £11,000. Neither individual is in a position to pay.

There is also evidence of personal assistants being left in a vulnerable position because national insurance contributions were not being paid. Sometimes personal assistants have found that their contributions were adrift and that they did not qualify only on attempting to apply for a benefit during sickness. It is essential, in my view, that in calculating the amount of direct payment, local authorities should take into account those additional employment costs. I beg to move.

7 p.m.

Lord Carter: We are glad to support the amendment from this side of the Committee because we believe that the noble Lord, Lord Swinfen, has raised an important point. We have already touched on it once or twice in discussion on the previous amendments. It is important that the new responsibilities and liabilities of the recipient of direct payments must be recognised. We discussed earlier the effect of VAT and other costs which arise. I referred to the problem of the recipient thinking that the person he or she employs is self-employed. If the Inland Revenue turns round and says after a time that that person is not self-employed, the recipient will be liable for both the employer's and employee's proportion of tax and national insurance contributions.

The amendment is well worded to draw attention to the reasonable costs of a good employer. It also makes the point that regulations should provide for this rather than the consultation paper which only refers to guidance. There is nothing in the consultation paper on the matter. It states that advice is required from the local authority. The liabilities and responsibility for tax, national insurance and other liabilities,

    "should be made clear by the local authority when offering people direct payments".
That is fair enough. It is good guidance to local authorities as regards the advice that they should give. But unless it is in regulations, it is not clear how it could

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be enforced. It is an area at which the Government may have to look carefully to ensure that recipients of direct payments are not penalised.

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