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20 Feb 2007 : Column GC1

Grand Committee

Tuesday, 20 February 2007.

The Committee met at half-past three.

[The Deputy Chairman of Committees (Baroness Gould of Potternewton) in the Chair.]

Welfare Reform Bill

(First Day)

The Deputy Chairman of Committees (Baroness Gould of Potternewton): Good afternoon. Before I call the first amendment I have to tell Members of the Committee that, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 1 [Employment and support allowance]:

Lord Skelmersdale moved Amendment No. 1:

The noble Lord said: I shall speak also to Amendments Nos. 2, 17, 103 and 18. What a select band we are in this Room this afternoon. It is particularly nice to see the noble Lord, Lord Morris of Manchester, in his place among us, because he so often puts his parliamentary duties before his health. Clearly his health is such that he can be with us today; I am delighted with that, because he has enormous experience in the area that we are about to discuss.

The first amendment in this group may seem to many Members of the Committee rather aggressive. It is not meant to be. My noble friend and I tabled it to get an early opportunity to hear the Government’s response to some very basic questions. We have heard a great deal, all of which I entirely agree with, about the benefits that we have seen in another place, and I hope will see here, concerning a consensual approach to the difficult issues to be debated, and I hope resolved, during our discussions on the Bill.

Unfortunately, some of the largest issues that I hope to be debated are difficult to introduce, as they revolve around what is not in the Bill rather than what is. Members of the Committee with a better knowledge of Latin than me may remember that Caesar, in his Commentaries on the Gallic Wars—perhaps in volume one or two—commented that men worry more about what they cannot see than about what they can. The Government have been unusually co-operative in laying before your Lordships draft copies of many of the regulations that the Bill will empower, along with extensive explanatory material. I am sure that all Members of the Committee are as grateful as I am for that. Although those have been extremely helpful, the Government have been silent on one of the most important questions that the Bill has raised; namely, what the new benefit levels will be. I hope that Members of the Committee will bear with me as I go through the many questions that arise out of that, which the Minister must surely appreciate.

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The basic question obviously has a significant impact on not only new claimants of ESA, but those who must eventually migrate from the old system to the new. The Government have promised that the basic allowance plus the support component will be greater than long-term incapacity benefit. However, I have failed to ascertain whether that is with or without premiums. The notes on the draft regulations suggest that they will continue. If so, for how long? I observe that the noble Lord, Lord Oakeshott, is as confused on the matter as I am, otherwise he would not have tabled Amendment No. 18.

Next—I may be jumping the gun a little—I am particularly concerned about two words in paragraphs 5(2)(a) and 6(2) of Schedule 4. The schedule states that:

I would be grateful for an explanation of what “in ... part” means in that context. It has been taken by many of the lobby groups as basing all future levels of ESA benefit on the lowest possible measure of the old. For example, it seems that the assessment phase level is set against the lowest level possible of JSA, and that the support benefit is set against incapacity benefit, both being stripped of all premiums, which in reality are significant elements of both benefits. That is especially relevant to the group of disabled people aged 16 to 24. Let us assume that the first day of operation of ESA is 1 April—before noble Lords reach for their diaries, I am well aware that this year 1 April falls on a Saturday but I ask them to bear with me—and let us further assume that it is a Monday. Will a young person on IB on 31 March get the same or less than the equivalent young person who starts his claim on 1 April and, as is hoped, has it completed 12 weeks later?

These questions, in particular, are vital when it comes to migration. This is the area where the Government have given us the least information and I hope that they will be able to remedy that over the next few sittings. There has been much debate over how long migration is expected to take. “As resources allow”—words that are whistling round Whitehall at the moment—is a similarly flexible phrase. There is also much confusion over how claimants will be treated during migration. I understand that those currently claiming IB will not be moved to the lower assessment phase benefit as this will represent a significant loss of benefit for those 13 weeks. However, can the Government clarify whether these migrants will have to undergo a PCA to confirm to which group they will finally be assigned? After all, it is not impossible that the new descriptors will lead to many people currently on the higher level long-term IB being newly assessed as not being limited for work-related activity.

Another complication here is the application of linking rules. A correspondent whom I mentioned on Second Reading has raised concerns over how these will apply. The situation is clear enough with those who are on ESA, but what of migrants? Let us suppose

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that a current claimant on long-term IB manages to find employment, so comes off the benefit just as ESA is rolled out under him. On losing that job within two years, he should return to a similar level of benefit, presumably as a support component under the new regime. Can the Minister explain whether he will remain free from conditionality, as is the case for new claimants receiving that level of benefit?

Then, to complicate the story even further, let us suppose that after a time he again finds himself employed—again, for less than two years. Will he continue to be returned to the support group? When do the Government intend to require PCAs from these migrants? I suppose that here it is appropriate to mention the employment grant of £40 a month for those coming into work. Will they get several dollops of this, or will it be limited to a 24-month working period or what? I repeat that I am referring to someone who is in and out of work. There is also the possibility of self-migration. In other words, can the Minister confirm that current claimants who are actively seeking to migrate—particularly those with mental health and learning disabilities, who have available greater support, such as personal advisers—are also able to migrate, as the notes on regulations suggest?

Moving away from questions surrounding migration, I return to the issue of where levels will be set. I understand that the basic allowance, as awarded during the assessment phase, will be similar to the basic jobseeker’s allowance—so similar, in fact, that it will be less for young people over the age of 25 but more if they are a couple. Can the Minister explain why these distinctions are being continued into the assessment period when they have been rejected for the period afterwards? That seems illogical. Why, indeed, do the Government want it both ways? Surely it would be clearer and cleaner for them to decide whether a distinction is or is not to be made on the grounds of age.

Another surprise on reading the material is that the Government are planning to continue so many premiums into this new regime for the income-related ESA. Severe disability is mentioned as an example; this seems an unnecessary complication given that the new benefit already has a more generous payment to the severely disabled or ill claimants in the form of the support component. Why does that benefit not already encompass that premium?

I should also like clarification on whether these premiums, presumably along with passported benefits such as free prescriptions, will be extended over the assessment phase for new claimants. The explanatory material seems to suggest that they do, but how will that be managed? Claimants will not yet have been assessed as to the need of any benefits relating to their disability at that point.

There is also the question of child-related premiums and passported benefits, such as the enhanced disability premium or free school meals. Of course, I can understand the need to continue with the premiums while that area is reformed, but I hope that the Minister can reassure me that premiums will be withdrawn as soon as possible and absorbed instead into what is

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undoubtedly—or will seem so, when I have had the explanations that I have asked for—a new, simpler benefit.

I appreciate that this is a very long list of somewhat disparate questions, but a complete set of answers will save much time later, which is in everybody’s interest—always supposing that I remember the answers given by the Minister. I beg to move.

Lord Addington: I shall restrict my comments to Amendment No. 18 in this group. We are in the process of trying to get clarification and probing, and here we are exploring what will happen to the premiums in income support and how they will be dealt with. In other words, will anyone lose out on this? Clarification on this point will help us find out exactly what the situation is, and I hope that the Minister’s answer will allay certain fears that undoubtedly exist out there, because we simply do not know exactly what is going to happen.

There is not really much else to say here other than that there are fears and worries related to the changeover. Can the Minister assure us about what will happen, where it will be regulated and how soon we will see it in its correct form? If so, he will deal with most of the concerns on this matter. I look forward to his answer.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): I shall start in the same vein as the noble Lord, Lord Skelmersdale, by acknowledging the expertise in the Room today. There are people, including my noble friend Lord Morris, who have been engaged in these matters for many years, and the approach taken in the other place, at Second Reading here and in the engagement since bodes well for the issues that we have to address.

As the noble Lord, Lord Skelmersdale, said, these amendments are designed to explore the Government's intentions regarding the rate and payment of the employment and support allowance, for both new and existing customers. Pathways to Work pilots have already demonstrated that, with the right help and support, many people on incapacity benefits can move back into work, reinforcing our view that labelling people on incapacity benefits as incapable of work is wrong and damaging. This, coupled with the complexity and structure of incapacity benefits, works against our intention to help people focus on their aspirations.

Our intention, as your Lordships know, is to replace the current system of incapacity benefits with the new employment and support allowance. Unlike current incapacity benefits, the new allowance will rightly focus on how we can help people into work and will not automatically assume that because a person has a significant health condition or disability they are incapable of work. We believe that that is the right approach, which has been broadly welcomed by many organisations representing people with ill health and disabilities as well as by Members of this Chamber on Second Reading and throughout all parties in the other place.

With your Lordships’ agreement, I shall address some of the issues more fully and seek to answer each of the questions that has been raised.

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Amendment No. 1 would remove the first subsection of Clause 1, which introduces the new employment and support allowance and establishes that it will be payable subject to the provisions of Part 1. This is a fundamental part of the Bill which is essential in establishing a new system of hope and support to help give sick and disabled people the opportunity to make the most of their capacity.

3.45 pm

Amendment No. 2 seeks to remove Clause 1(3)(e) and (f). These paragraphs set out that for a customer to be entitled to employment and support allowance, they cannot simultaneously be entitled to income support or jobseeker's allowance. The amendment, as I understand it, looks at our intention regarding entitlement to employment and support allowance and the possible additional access to other income-related benefits. Indeed, the noble Lord confirmed that.

The new employment and support allowance is not structured in the same way as the old incapacity benefit, where incapacity benefit may in certain circumstances be topped up with income support. Instead, employment and support allowance is an integrated benefit, where a customer need apply only once and can, if necessary, receive both strands of the allowance.

As the noble Lord recognised, no final decisions have yet been made on the exact rate for the main phase of the benefit. However, as the Government have previously made clear, the main phase rate of benefit—the basic allowance for someone on the contributory benefit or for a single person on the income-related benefit plus the work-related activity component—will be higher than the current long-term rate of incapacity benefit, and those on the support group will receive a higher amount. Above that rate, people in the most financial need will continue to receive premiums such as the enhanced or severe disability premiums, where appropriate.

For some people only one benefit will be available. However, for others there will be a choice. For example, a lone parent who also has a disability may be able to claim either income support or employment and support allowance. In such circumstances, we believe that a customer should only be able to claim one of the two benefits. To be paid two benefits at once would lead to duplication of provision, creating an inappropriate and significant burden on the taxpayer. The purpose of these paragraphs in Clause 1, therefore, is to ensure that that does not happen. This is common to other social security legislation, such as the jobseeker’s allowance.

However, noble Lords will know that in the current system income support is not the only source of help that the Government provide to people on low incomes, and we intend to bring similar provisions forward for people on ESA. For example, people on income-related ESA will have automatic access to full housing benefit and council tax benefit; and we expect that customers on income-related ESA will also have access to a range of other passported benefits, such as prescription charges or free school

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meals. The noble Baroness, Lady Thomas, has tabled a separate amendment on these issues, and I am sure that we will discuss them in more detail later.

I turn now to Amendment No. 17. Clause 4 provides for the calculation of the applicable amount, which is the amount of benefit a customer will receive if he, or his partner, has no income. If they do have income, the applicable amount will be reduced by the amount of that income. I believe that the intention behind Amendment No. 17 is to probe our intentions, rather than to remove the amount altogether, which of course would be the effect of the amendment.

As I have already said, the applicable amount for income-related ESA includes the personal allowance for the customer and any partner and, from the 14th week of the claim, either the work-related activity component or the support component where the PCA is satisfied. The applicable amount also includes the enhanced disability premium, severe disability premium, pensioner premium and, where appropriate, the carer premium. It will also include certain housing costs such as mortgage interest and service charges, which are currently payable as part of income support.

Turning to Amendment No. 18, I recognise the concerns noble Lords have about the benefit position of disabled people who would previously have qualified for the disability premium. However, the employment and support allowance introduces a new structure to the benefits for people with limited capability for work. That cannot be compared directly with past systems. Where a customer meets the personal capability assessment threshold, the new benefit provides that, after an initial assessment phase of 13 weeks, a work-related activity component or a support component will be payable. We should recognise that for most people that is considerably earlier than under the current arrangements, where the higher rates of benefit are payable after a year of incapacity.

This amendment means that the disability premium will continue to be payable in addition to the work-related activity component or the support component. In our view, the new structure of ESA better supports our aim of encouraging people with a limited capability for work to engage in work-related activity where they can. In addition, disabled people with additional needs will still have access to a range of appropriate income-related premiums, as I spelled out. The new arrangements provide that many people will receive additional support far sooner than under the outdated arrangements of the past.

Amendment No. 103 removes paragraph 5(1) of Schedule 4, which allows us to apply the linking rules to people leaving the benefit under prescribed circumstances and then returning to that benefit within two years. At Second Reading, I was clear that people migrating to employment and support allowance as part of the mandatory process from the existing system would maintain the same cash level of benefit.

As has been made clear during the passage of the Bill, it is our intention that, over time and as resources allow, existing incapacity benefit cases will be migrated across to the employment and support allowance, so that they too may benefit from the new complementary structure of benefit and support, which will also help to smooth administration and reduce complexity.

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We want to migrate existing customers on to the new regime as resources allow, but we need to do so in a controlled manner. Therefore, we do not intend to start the mandatory migration process immediately at the commencement of the employment and support allowance. This is consistent with previous changes of this scale and will allow us to make sure that the new process is bedded down, to make sure the migration is as smooth as possible for customers and to reduce the risks around such a large undertaking.

We believe that it is right to migrate first those with children and those who have been on benefit for the shortest time, as we want to help families with children return to work to lift them out of poverty and to prevent long-term benefit dependency before it arises. However, depending on what evidence comes out of the Pathways to Work extension pilots, before we begin migration we will of course refine and if necessary change this strategy in line with the evidence we have. In the interim, as has been the case in all the Pathways to Work pilots from their inception, anyone already on incapacity benefits may volunteer for any appropriate support we offer.

We propose that, until the mandatory migration process starts, existing customers will remain on their current benefit and current linking rules will apply. Therefore, if someone leaves incapacity benefits they will return to their current benefit, as now. However, once the mandatory migration starts we will be in a position to provide the complementary support provided by the employment and support allowance to existing cases, so at that stage it would be appropriate for people returning to benefit on linking rules to return to employment and support allowance, but they would return to the same level of benefit as they left.

We believe that our approach with the new employment and support allowance is right. These amendments add nothing to the Bill as drafted. Powers elsewhere within Part 1 provide for the entitlement to the new allowance. They enable us to move away from a culture of incapacity and despair to a new regime of rights and responsibilities, where there is opportunity for all.

I shall seek to answer some of the residual questions from noble Lords. If I fail to cover them, I hope noble Lords will press me on the matter. On the issue of linking rules and existing cases, until the mandatory migration process starts, the current linking rules will apply to existing customers. If someone leaves IB, he will return to it.

I was asked why we are having young people’s rates in the assessment phase but not in the main phase. We have made it clear that we do not want to make any assumptions about a person before the main medical assessments have been satisfied in the first three months of the benefit. That is why the assessment phase rates are based on basic jobseeker’s allowance personal allowance rates. Once in the main phase, customers will receive the same rates regardless of age.

The issue of the PCA for existing customers was raised by the noble Lord, Lord Skelmersdale. We are still reviewing and testing the new PCA and, once that is finished, we will be in a better position to say what

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is the most appropriate stage to introduce it for existing customers. We expect that it will be at the first PCA review following migration to the ESA.

It has been suggested that our policy is not clear, and that there is no new detail. It is not possible at this stage to give every last shred of detail, because I do not want to commit prematurely to something that turns out not to work. However, we need to develop our proposals in line with the evidence.

There were questions about what will happen in the ESA to 16 and 17 year-olds who receive disability premium, and will get the 18 to 24 year-old personal allowance rate at the moment. Many young ESA customers will have access to the higher main phase rate of benefit earlier in the ESA than they would under the current system. It is a question of introducing a balance into these new allowances.

The noble Lord asked what “in whole or part” means in Schedule 4 in relation to matching terms. Schedule 4 contains wide powers to allow us to make sure we can move people smoothly from one benefit to another. Because the structures of the ESA and the IB and IS are different, it is important that we have that flexibility. It has also been clear that we want to simplify rules wherever possible, while protecting customers’ cash level benefits.

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