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Lord Mackay of Drumadoon: My Lords, I am grateful to the noble and learned Lord. His further remarks confirm my initial impression that the amendments are designed to broaden the scope of the work which takes place before committees of the parliament and the parliament itself without in any sense increasing the statutory functions of the executive or the parliament. In that respect, the amendments fall to be welcomed. Most of us are united in the view that the parliament should work as successfully as possible. The elimination of any artificial limitations on its work is to be welcomed. I therefore do not insist on my Amendment No. 101A to Amendment No. 101.

Amendment No. 101A, as an amendment to Amendment No. 101, by leave, withdrawn.

[Amendments Nos. 102 to 103E not moved.]

On Question, Amendment No. 101 agreed to.

Lord Hardie moved Amendments Nos. 104 to 108:

Page 12, line 12, leave out ("That power may be exercised") and insert ("Such a requirement may be imposed").
Page 12, line 15, leave out ("The Clerk shall give") and insert ("A requirement under section (Power to call for witnesses and documents) shall be imposed by the Clerk giving").
Page 12, line 18, leave out ("matters relating to") and insert ("subjects concerning").
Page 12, line 20, leave out from ("particular") to end of line 21 and insert ("subjects concerning which they are required").
Page 12, line 34, leave out ("relating to") and insert ("concerning").

On Question, amendments agreed to.

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Lord Hoyle: My Lords, before we move to the Statement on welfare reform, I should like to take this opportunity to remind the House that the Companion indicates that discussion on a Statement should be confined to comments and questions for clarification. Peers who speak at length do so at the expense of other noble Lords.

Welfare Reform and Uprating of Benefits

3.48 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham): My Lords, with the leave of the House, I shall now repeat a Statement given in another place by my right honourable friend the Secretary of State for Social Security. The Statement reads as follows:

    "With your permission, Madam Speaker, I would like to set out the next phase of the Government's plans to reform the welfare state and the annual uprating of benefits. We came to power with two huge challenges--to raise standards in education and to reform the welfare state. Today we rise to the challenge of welfare reform. Today we put words into action.

    "Welfare reform is essential, because many people are poorer than they need be. Many are dependent on benefits when they need not be; and others are neglected when they should not be. Our central objective is to provide work for those who can and security for those who cannot. Our plans will be based on our belief in fairness, will give greatest help to those with the greatest needs and will make sure that benefits only go to those who are entitled to them.

    "All reforms will be undertaken after consultation. The vast majority supported the principles and success measures set out in the Green Paper. I am happy to reaffirm them today. What I announce today will be the first of a series of announcements that will form the basis of legislation during this Parliament beginning early next year.

    "Legislation will take effect over a number of years. All existing claimants who are eligible for their benefits when the changes are introduced will be protected.

    "Today we are publishing three documents showing how we are putting principles into practice. The first is a document that shows what we have done so far on welfare reform--the New Deal, childcare, the working families tax credit--the principles that guide that reform and the new measures that we are planning.

    "The second document sets out our plans for a single gateway, a 'something for something' deal for those out of work that will change the culture of the welfare state. The third is a consultation document on our plans to reform disability benefits to give more help to those in greatest need and to tackle the abuses in the current system.

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    "First, the benefits uprating. Today I can announce the largest ever increase in child benefit. As a result of the uprating from next April child benefit will rise by £2.95 to £14.40 a week. That represents real security for our children provided by this Government.

    "Today I can announce, too, new help for the poorest pensioners with the introduction of a minimum income guarantee. The poorest pensioners will get a minimum of £75 a week. Pensioner couples will receive £116.60. Again, that means real security for today's pensioners from this Government.

    "Most national insurance benefits will rise by the retail prices index--3.2 per cent. Means-tested benefits will generally increase by 2.1 per cent. in the normal way. I have placed the details of the uprating of benefits in the Vote Office.

    "I turn to our plans for a single gateway to the benefit system for everyone of working age. When I looked at the current way the DSS hands out money I was amazed to learn that people can claim benefits without even having to turn up for an interview, without being given any help finding work. That will all change. We have created new opportunities for people to work: £195 million for the New Deal for disabled people; £190 million for national introduction of the New Deal for Lone Parents; and the first ever national childcare strategy. We are making sure work pays through the new minimum wage and the working families tax credit.

    "We believe that in return it is only reasonable that people of working age--lone parents, the unemployed and people claiming incapacity benefits--should be required to attend an interview to discuss their options for work. There will, of course, be people such as the terminally ill for whom an interview would clearly be inappropriate and the rule will not apply.

    "We are not forcing people to work. The interview will give real opportunities to people written off by the system. It will create a fundamental change in culture. People will no longer ask of the system, 'What can you do for me?' but, 'What can I do to help myself?'

    "We will improve the quality of advice we give as we learn from the New Deal. We will proceed carefully, starting with pilots. The full scheme will be in place in April 2000.

    "Now we turn to disability benefits. Here, too, we aim to provide work for those who can and security for those who cannot. When the severely disabled are not getting the help they need, when one million disabled people say that they want to work but are not given the chance and when one quarter of men over 60 are on incapacity benefit because the last government used it as a way of hiding the unemployment figures, we know that the system needs change.

    "We promised in the Green Paper that disabled people should get the support they need to lead a fulfilling life with dignity. That is what we will do. First, the foundation for all that we do is an unshakeable commitment to comprehensive civil

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    rights for disabled people to ensure that they are respected not just in the work place but in all areas of life.

    "We are doing more. Today I can announce a £30 million programme of new help for disabled people seeking work, extra to the New Deal. But we also want to improve disability benefits. Disabled people with the greatest needs are not getting the support they need; others are receiving support that they should not. People disabled young in life with no hope of work get so little help through their severe disablement allowance that 70 per cent. of them have to claim income support. Disabled people on low incomes needing day and night care do not get enough help to meet their extra needs.

    "Young children with little mobility receive no recognition from the system. At the same time, many of the claims to disability living allowance are not always supported by medical evidence. Some people have been awarded benefit for life even though they have conditions which are expected to improve.

    "Today we set out for consultation proposals to provide more help to the most severely disabled people in greatest need and action to make sure that disability benefits go to the right people.

    "First, we propose for new claimants to change the system of support to congenitally disabled people and others disabled young in life so that they get greater help. Those aged over 20 can already qualify for incapacity benefit if they have worked or, alternatively, for income support. In the future, severe disablement allowance (SDA) will no longer be available to them. However, many young people disabled before they were 20 have little hope of work. Today I can announce that we will therefore give them the biggest ever rise in support with an extra £25 a week in benefit.

    "We propose a fundamental reform to incapacity benefit for future claimants only. The benefit is meant to be for people who are unable to work. Yet the number of claimants has risen threefold over the past 20 years, a time when the nation's health has been improving. But we are concerned that the benefit is becoming abused as an enhanced early retirement subsidy.

    "For future claimants we will discourage the use of IB as an early retirement subsidy. People who have a private pension or health insurance payment of more than £50 will receive less support. Every pound of private income they have in excess of the £50 limit will reduce their benefit by 50p. Also, for future claimants we will restore IB to its original purpose as an insurance benefit for people who have worked. Too often it has been abused as a more generous form of support by the long term unemployed.

    "We will strengthen the link between the work and benefit. Only people who have worked and paid recent contributions before the claim will be eligible for benefit. We will reform the all work test so that those who claim benefits have to give evidence of their work prospects. This will give information of the work disabled people can do.

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    "In addition we want to improve the provision for disabled people with the greatest needs. We will provide real security for the poorest disabled people with the highest care costs. Today I can announce a disability income guarantee which will give £129 a week to a single person and £169 to a couple. This guarantee will be extended to three and four year-olds so that a couple with one child on income support and disability living allowance with the highest care needs will get at least £199 a week.

    "We will also extend the higher rate of DLA mobility component, worth an extra £35 a week, to all three and four year-old severely disabled children.

    "The benefit integrity project which we inherited from the last government failed. It caused a lot of anxiety to disabled people. We will cancel the project. In its place we will put in a new system for reviewing claims to DLA and AA that is both fairer and more sensitive. It will work in the interests of disabled people. These changes will generate three-quarters of a billion pounds in long-term savings. But even with these changes, real terms spending on disabled people will continue to rise in the long run. These reforms do not affect the CSR plans announced by the Chancellor of the Exchequer in July.

    "It is quite right that as our society gets wealthier the amount we spend on the most vulnerable should increase. But benefits must go to those for whom they were intended--to give most help to those in the greatest need--and must be affordable.

    "The structural changes announced today will deliver significant savings over the longer run. But they do so by ensuring that greatest help goes to those in greatest need, and that benefits go to those for whom they were intended--work for those who can; security for those who cannot.

    "Today, for the first time this Government will provide real security and record levels of child benefit. That is good news for those out of work who will be given better advice and opportunities to work, but bad news for those who abuse the system, and bad news for those who try to claim benefits they are not entitled to be on.

    "Today this Government show a determination to modernise the welfare state and reshape it for today's world, so that it provides opportunities for all those who want to work, and delivers security to all those who need it.".

My Lords, I commend this Statement to the House.

4 p.m.

Lord Higgins: My Lords, the House will be grateful to the noble Baroness for repeating the Statement in your Lordships' House. In the Department of Social Security, Secretaries of State come and go, Ministers of State come and go, but the noble Baroness remains. For that we must be grateful because the complexity of these matters is immense. The expertise which the noble Baroness brings to the Front Bench is therefore greatly to be welcomed. I think all of us appreciate that. It is

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rather regrettable that the Statement has been made in the other place and in this House but appeared in large measure on page 2 of the Evening Standard ahead of that. That is typical of the way in which the department seems to leak badly. That is to be regretted.

I shall try to put this Statement in context. A crucial feature of the Government's whole plan is to reduce the amount spent on social security and to spend that money on health and education. When I raised this matter last week with the noble Lord, Lord McIntosh of Haringey, he said that the Government proposed to decrease the proportion of public expenditure spent on welfare rather than to decrease the absolute amount. I find it difficult to discover any statement to that effect. The statements made by the present Prime Minister before the election clearly implied there would be a cut in the absolute amount. Indeed the Labour Party manifesto gave the same impression. What is the overall effect of what is now proposed? Is it still the Government's intention that the social security budget as a whole should be cut both in absolute terms and as a proportion of national income? We are to have a lower rate of economic growth which may affect that issue. We should be given a clear answer to that point to put this Statement in context.

The present Secretary of State for Social Security carried out the comprehensive spending review when he was Chief Secretary. We were told that the plans for the next three years were set in concrete, whereas the present Government say they have planned ahead for three years but there is a degree of flexibility. If that is so, it is not now at all clear how the Secretary of State for Social Security will change the budgets that he said were set in concrete. The Statement is remarkable in that it states the reforms will not affect the comprehensive spending review plans announced by the Chancellor. The Government cannot have it both ways. Either there are changes in public expenditure, or there are not. They must presumably affect the comprehensive spending review plans.

Having said that, we of course welcome the general uprating as regards specific improvements in disability benefits and so on. Nonetheless, we shall need to consider carefully the structural changes which are proposed. We are told that there will be pilot schemes to test the changes and if it is felt that the pilots have been successful, the changes will be adopted nationally. However, the pilot scheme to test the lone parent proposal was extremely disappointing. Yet the Government are still going ahead with it. That casts some doubt as to whether pilot schemes are being operated in the way they should be operated.

The proposal for a single gateway is something which your Lordships will need to consider further. However, I cannot but remark that that builds on the basic jobseekers approach which the previous government introduced, and which at the time was heavily criticised by the then opposition. Nonetheless we shall need to consider carefully the single gateway proposal. We have not had an opportunity to examine the relevant document in any detail.

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The noble Baroness lays much stress on protecting the position of existing claimants but not on protecting the position of existing contributors. Ever since the time of Beveridge we have had for many years a system where you contribute and in return for those contributions you receive benefits. However, since they came into power, the Government have increasingly undermined that contributory principle. They have undermined the idea that you pay contributions and then receive certain benefits as of right. A new contract for welfare: Support for Disabled People states, strangely, at paragraph 20,

    "At present, people who have been unemployed and getting credits can qualify for Incapacity Benefit on the basis of contributions paid many years ago. We propose to change this so that entitlement to Incapacity Benefit requires contributions to have been paid more recently".
Will the noble Baroness tell us why the earlier contributions are now, apparently, to be regarded as worthless, because those who paid them presumably expected to obtain reasonable benefits in return?

Paragraph 21 relates to incapacity benefit. It is headed,

    "introducing a fairer balance between public and private provision".
This afternoon the noble Baroness has told us that some of those who receive incapacity benefit are paid it in addition to what is described as a "reasonable pension". This is the pension paid to those who are in an occupational pension scheme. This group is suffering badly, particularly as regards schemes which have a defined contribution. Those people who are about to retire now are being hit heavily both by the decline in the stock market value of their assets, which determines the total fund, and more particularly by the decline in annuity rates. But we are now told that these people who have suffered from the effects of the Government's policy are now to have that pension reduced, if they receive incapacity benefit, on a basis of 50p for every pound over £50. That cannot encourage prudence. These people have made provision for their old age. Suddenly, out of the blue, with no warning or consultation, their just entitlement will be apparently reduced. That is a quite extraordinary provision to introduce.

Generally speaking, the whole contribution principle has been undermined. The noble Baroness and I have debated this previously in relation to the previous Budget. As regards the minimum guarantee for pensions, some people will receive the pension who have not contributed. We shall need to study the documents carefully in the light of the Statement. Perhaps the noble Baroness can tell us whether it is the case that incapacity benefit is being reduced for new claimants, as that is my understanding? I hope she can clarify that point.

These are extremely complex matters. It is difficult to examine them across the Floor of the House on the basis of a Statement that has only just become available. I hope therefore that ahead of the legislation, which as the noble Baroness said, will not be before next year, we can hold a debate in this House and go into these matters in great depth.

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4.10 p.m.

Lord Goodhart: My Lords, perhaps I may follow the noble Lord, Lord Higgins, in paying personal tribute to the noble Baroness, Lady Hollis, for her work in the Department of Social Security. On these Benches we welcome much of the content of the Statement and the three documents published today. However, I have a number of criticisms and questions.

We welcome the increase in child benefit. It is a particularly valuable benefit, both because of its very high rate of take-up and because of the flexibility that it offers to parents, especially to mothers, who are given either the option of using it to pay for child care while remaining in work or to replace their previous income from work if they wish to stay at home to look after their children. We also welcome the minimum guarantee. However, we should like to know what the difference is between the proposed minimum income guarantee and the present right of poor pensioners to income support. Does that involve something more than a simple re-badging of income support to those of pensionable age?

Turning to the single gateway proposal, one was pleased to note the remarkable generosity of the Government in saying that those who are terminally ill need not apply for an interview! But there are a number of other categories. What about those, for instance, who are within one or two years of reaching retirement age? Do they have to attend an interview with a view to obtaining further jobs--which they are extremely likely at that age to get! What about lone parents with pre-school age children? Let us take the case of a woman deserted by her husband or partner, or whose husband or partner has died, leaving her with three children under five, one of them a baby. I accept that such people will not immediately be required to seek work, but is there any point in even requiring them to attend an interview when the prospect of work will not arise for them for several years? Will there be an opportunity for claimants to ask for a home visit where appropriate--as it will be in the case of the disabled or those people who suffer from agoraphobia or other problems which may make it difficult for them to leave home? Will there be appropriate arrangements for those who have difficulty in speaking English?

What are the sanctions for non-attendance at interviews? They are not spelt out in the Statement; however, I understand from the supporting documents that it is intended that benefits can be withdrawn as a sanction from those who do not attend. I can see that it may be an acceptable sanction for those who are free to work and have no reason to refuse, but what about the position of the single parent? Will such parents be at risk of having benefits withdrawn if they fail to attend an interview, with the consequences that that will have for their children?

Turning to disability benefits, again there is much in the Statement that we welcome. We accept that there have been abuses of incapacity benefit and the increase in the number of those drawing incapacity benefit over the past few years is wholly inexplicable in terms of the health of the nation. We welcome the proposal to

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improve help to congenitally disabled people and people who become disabled early in life. However, there are some oddities. The remark in the Statement that the benefit is meant to be for people who will never work is not exactly true. As I understand it, it is meant to be a benefit for people who are unable to work for a significant period of time as a result of disability and therefore applies to people who, let us say, suffer from a long-term disease but one which may well improve in the course of time.

I echo the remark of the noble Lord, Lord Higgins, that the proposal that people with a private pension or health insurance will lose incapacity support is a dangerous one. It will discourage savings. Furthermore, those who have to take early retirement will--quite apart from what we hope are short-term problems and falls in the stock market--because they are retiring at an early age, have had less opportunity to make contributions, will have fewer years of service and will as a result receive a lower pension than if they had stayed in work until normal retirement age. Therefore, if incapacity benefit is withdrawn they will suffer a double loss.

A cause for great concern is the statement that only those who have worked and paid contributions before making a claim will be eligible for benefit. Looking at the background document, that statement is incomplete. The intention is that incapacity benefit will be available only on the same terms as jobseeker's benefit; namely, to those who have paid at least one year's contributions within the past two years, and for that purpose the contribution credits payable on behalf of the unemployed will not be available. I can understand that approach in relation to jobseeker's benefit, but it seems absolutely wrong that, for instance, someone who has lost his job as a miner, is unemployed for more than a year and then becomes disabled will lose the right to incapacity benefit.

There also seems to be a loophole as regards students. If they are disabled at the age of 20 or more they will not qualify for the severe disablement allowance, since that is limited to those under 20; however, they will not qualify for incapacity benefit because they have no record of contributions.

So while we welcome much of the content of the Statement and will support the Government on many of the proposals, there are many matters that require investigation; indeed, in some cases they do not at present appear acceptable.

4.18 p.m.

Baroness Hollis of Heigham: My Lords, first, perhaps I may thank both noble Lords for the generosity of their personal comments. I take them as a generous tribute. I hope that I shall repay them in spades by being as tough-minded, argumentative and forensic as I can manage to be. I am sure that your Lordships would hope for nothing less.

The noble Lord, Lord Higgins, asked how we were balancing our expenditure plans with the CSR figures and so on. With his superb Treasury expertise, the noble

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Lord will know that average growth in the social security budget over the last Parliament of the previous administration was 4.1 per cent. a year. It is a matter of whether or not family credit is included, but I am taking like for like. Average growth in the social security budget under this Government will be 2.2 per cent. over the lifetime of this Parliament. That is the figure in the CSR; the Chancellor has repeated it; and we confirm it today. That is our expectation and it has not changed. It means that while social security expenditure will continue to grow it will be much less than it would have been under the previous administration. And much of that growth is demographically driven, for good reason: there are more pensioners, they are living longer, and they are entitled to benefit. As a result of the increased expenditure some £13 billion will go to pensioners; £3 billion on child benefit; £2 billion cumulatively to the unemployed and single parents; and something like £10 billion cumulatively over the lifetime of this Parliament to disabled people.

So the difference between us is that we have, so to speak, capped the growth; nonetheless, it will continue in real terms. As I hope the noble Lord will accept, within this package we are also seeking to focus our expenditure on the poorest and those who have the greatest needs, including disabled people.

The noble Lord said that the new deal for lone parents was disappointing. The pilots have so far shown that about 5,000 lone parents have, as a result of this scheme, gone into work or may have had their hours of work increased. Should the same ratio of jobs to interviews continue, about 100,000 lone parents will have the advantage of either an interview, moving into work or working additional hours, which they might not otherwise have done. That must be a worthwhile enterprise. No one on either the Government or the Opposition Benches has told the Government of any other way to help to encourage lone parents to go into work when they feel that the time is right.

The point about the gateway interview is that at the moment too often lone parents do not know what they do not know. There is a real problem for them of not knowing what opportunities for childcare we can offer or what training and education facilities we can offer. In the pilots for the single gateway we seek to ensure that every new claimant will, at the point at which the single parent claims income support for the first time, have an interview at which the income support claims and possibilities in future of a new deal, the right to child maintenance and the like, will all be discussed with them. I do not believe that that would be unreasonably intrusive. Thereafter, the lone parent should be able to make the choice as to what she sees fit for her life, whether she is ready to go back to work now or later. It is for her to choose. We wish to empower her with the information she may not yet have as to what choices, options and opportunities are available for her. I hope that this will be regarded as a real and positive achievement for lone parents.

A further point that the noble Lord made was that we may be protecting claimants but we are undermining the contributory principle. That issue was raised by the noble Lord, Lord Goodhart, in particular in relation to

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unemployed people who have been out of work for a considerable time, who then become disabled and who would not in the future be eligible for incapacity benefit. At the moment, someone could work for five years, be unemployed for 20 and in the 21st year of unemployment receive incapacity benefit. I know that this is reductio ad absurdum, but someone could earn £400 per week for four weeks and then have a right to contributory benefit for the rest of their lives. That cannot be sensible because the incapacity benefit was designed to replace the earnings of someone in work who is forced out of work because of sickness. That was the intent of IB and that is the intent that we are restoring. We are saying that within two years they should be within the labour market: "For two years you may have been out of work, but if you have been out for longer than that it is not reasonable to treat you as though you had been forced out of work recently by sickness or disability". That is the point of the change.

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