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Grand Committee

Thursday, 1 March 2007.

The Committee met at two o’clock.

[The Deputy Chairman of Committees (Lord Haskel) in the Chair.]

Welfare Reform Bill

(Third Day)

The Deputy Chairman of Committees (Lord Haskel): 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 13 [Action plans in connection with work-focused interviews]:

[Amendment No. 74 not moved.]

Clause 13 agreed to.

Clause 14 [Directions about work-related activity]:

On Question, Whether Clause 14 shall stand part of the Bill?

Lord Skelmersdale: This is a new month but a continuing Committee stage. What I am about to produce is, I think, a new point.

Clause 14, which is entitled “Directions about work-related activity”, is treated rather shortly in the Explanatory Notes, which state:

We will come to an amendment in a few minutes’ time that addresses some of that. If we were discussing this matter as an Oral Question, I would ask the Minister a very brief question, such as “How?”. The reason is that I do not understand what this clause is doing. Will the Minister give us an example of how this would work? Although I suspect that it is a sensible provision, I should like that to be confirmed.

Lord McKenzie of Luton: I am happy to confirm that this is a sensible provision.

Clause 14 will permit the Secretary of State, through personal advisers, to direct that a given activity is not to be treated as work-related activity. I am aware of the concerns that have been raised outside this House on this clause and I hope that I can reassure noble Lords that we cannot and will not force customers to do a particular activity or unfairly deny them opportunities.

Clause 12(7) defines work-related activity widely as activity that will make it more likely that a customer will be able to obtain or retain work. This could cover a very wide range of activities and therefore allow the individual to choose the right ones for them. This is fundamental to a tailored approach that is based on choice for the individual.

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Regulations under the clause will set out the circumstances where directions can be issued. We believe that there will be cases where it is wholly inappropriate for individuals to pursue certain activities, even though these activities would meet the definition of work-related activity. In particular, we are thinking of the situation in which someone is provided with support to enter a particular type of job but states that he does not want to take up the job after finishing the course. I do not want to be too specific on this but it is effectively a failsafe mechanism if people are intent on trying to thwart the provisions. Given that we start with a wide definition of work-related activity—necessarily, because it is a key part of the process—we need to build in possible protections about its misuse.

I do not believe that in these or similar circumstances a customer should be able to meet a work-related activity requirement by taking the approach that I have just outlined. It would not be fair to other customers who were endeavouring to overcome potential barriers and, where it incurred any cost to the Exchequer, it would be unfair to taxpayers. I believe that these cases will be extremely rare but it is right that we have the powers to deal with them where they arise.

Any directions made under this clause will of course be subject to a right of appeal. Furthermore, when a direction has been made, the customer can undertake any other type of work-related activity to meet the work-related activity requirement.

If a customer who had been issued with a direction in respect of a particular activity failed to undertake another type of activity and did not have good cause for this, his benefit would be liable to a sanction. However, he would also have a further, separate right of appeal against the decision under Clause 12 that led to the imposition of the sanction.

Although we firmly believe that a collaborative approach with customers should be the norm, it is necessary to be able to act where a customer is undermining the principle and intent of the support that we are offering. I hope that I have provided sufficient clarity to the noble Lord and that he will now be able to support the clause.

Lord Skelmersdale: I am delighted to hear that the provision is basically designed to stop the “thwarting”—I think that that was the word that the Minister used—of the purposes of the Bill by a customer claimant. I readily understand that. I am sure that the Joint Committee on Human Rights will be delighted by the two rights of appeal which the Minister has just highlighted. That is extremely helpful. I will study what he said as usual, but, for the moment, I am more than content with the clause.

Clause 14 agreed to.

Clause 15 [Contracting out]:

Lord Skelmersdale moved Amendment No. 75:

The noble Lord said: I return to probing. This is a probing amendment which will give us the opportunity to discuss the many questions and concerns which have arisen out of the contracting-out of assessments

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and support provision to third-party groups, both not-for-profit organisations and private companies. Many people feel that the provision of benefits and support for disabled people should remain under the direct control of government and should not be privatised out to less directly accountable bodies. These concerns are shared by the Joint Committee on Human Rights, which called the attention of the House to this clause in its report on the Bill.

However, we on these Benches are not entirely pessimistic. Tendering out these jobs could lead to great advantages in terms of effectiveness and the standard of service offered to claimants. There are, however, legitimate concerns about the finer details of the contracts, and we hope that the Minister will offer strong reassurance on them.

One of the greatest concerns is that third-party organisations might be tempted to cherry-pick claimants who need the least support to make them capable of work. The Government have already done much to reassure us on this matter, but some questions remain. In particular, the breakdown of how payment will be awarded has led to controversy.

The Government have explained that they intend to pay contracted organisations in three separate chunks: 30 per cent up front for administration costs when they take the claimant on to their books; 50 per cent when the claimant reaches certain job outcomes; and the remaining 20 per cent after the claimant has remained in work for a sustained period. Unfortunately, this information has led me to think about even more questions.

The explanatory material that we have received states that the initial 30 per cent will be paid in monthly instalments. How will these instalments be calculated, given that it is impossible to know how long a claimant will need before he reaches the first of the outcomes and so triggers more financial reward? Will not a claimant who seems likely to make slow progress towards an outcome therefore attract a lower monthly instalment than one who is closer to employment, and will not that in turn make organisations less willing to take him on?

For the outcome-based payment, the material begs the question what exactly these outcomes will be. Will they be set individually for each claimant and, if so, by whom? There would surely be a conflict of interest if the personal advisers, based in the contracting organisations, set the benchmarks that the claimants had to work towards. Yet, if they are standardised outcomes, there is again the danger that claimants with a lot of ground to cover will be too expensive for the contracting organisations to take on.

The potential contractors to whom I have spoken have stated that, rather than have set levels to reach, they would prefer payment of the 50 per cent instalment to be based on measured improvement. Will the Minister explain why the Government have decided not to go down this route?

Finally, on the last 20 per cent, I understand that six months has been suggested as a sensible amount of time for the claimant to have been in employment for it to be considered “sustained”, which I think is the

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word used in the explanatory material. Does the claimant just have to be in work or must he be completely off benefits as well? If, after six months, he were then to become unemployed again and rejoin ESA, would the organisation handling his claim receive the 30 per cent initial payment all over again and would the payment process restart from that point or would the contractor’s past involvement be taken into account? Would the newly out-of-work ex-claimant necessarily have the same personal adviser, or even the same contractor? That is quite important.

I look forward to hearing the Minister’s response to these questions. I hope that he will do much to reassure the many organisations that have contacted me on these points. I beg to move.

Lord Oakeshott of Seagrove Bay: We return to the fray this afternoon with a somewhat depleted team on this side of the Committee. There are currently only two of us here; we felt that we perhaps had an unfair advantage yesterday. I apologise on behalf of my noble friend Lord Addington, who is speaking in the Olympics debate but will join us shortly.

Like the noble Lord, Lord Skelmersdale, we do not object in principle to involving either the voluntary or private sectors in this way. We are possibly even more sceptical than the Conservatives about how it will work in practice, however, and possibly more concerned to see effective safeguards. The parallels with the National Health Service are quite strong, where the Government have had an ideological drive to privatise, and that is no doubt the background to these proposals. We clearly see the cheap, easy and quick-win operations and procedures of the private sector there and the parallels with the more difficult problems and people, particularly those with mental health difficulties, as the noble Baroness, Lady Meacher, so movingly described last night, being left to the state. We will be scrutinising this closely and we want a great deal of reassurance from the Minister that that position will not arise out of the Bill.

We have already talked a good deal about commercial confidentiality in the Committee. Will the Minister give us the strongest assurance he can that, when these arrangements have been set up and Parliament properly wants to scrutinise how they are working in a year or two’s time, the Government will not hide behind this commercial confidentiality mantra? To be honest, when we have probed it in other areas, it has often proved to be just a cover to avoid embarrassment for the department; the commercial companies have often said that they have no objection to revealing that information.

I do not propose to rehearse the detailed questions of the noble Lord, Lord Skelmersdale, which seemed very proper. I look forward to the Minister’s reply.

Lord McKenzie of Luton: I am grateful for the broad acknowledgement that using providers as envisaged has support in principle. I well understand the need for noble Lords to have detail and reassurances on some areas.

The contracting out of the functions of the Secretary of State in Clauses 11, 13 and 14 is an important part of our strategy to help those with disabilities or health

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conditions back into work. Contracted providers have a wealth of experience and expertise in delivering employment support to this group of customers. In addition, contracted organisations may be able to reach customers with whom the Government have difficulty engaging. We also want to ensure that we deliver flexible and tailored support, and providers are well placed to adapt their provision to suit the needs of individual customers. These advantages apply to delivering mandatory elements of the ESA conditionality programme as well as to voluntary support, and we should take advantage of them.

Having a single organisation responsible for the delivery of a majority of functions makes the programme simpler for the customer to understand and engage with, and helps him to build a better relationship with his adviser. It also makes clearer the connection between the support that we are making available, and the responsibility of the customer to engage with the process—a principle at the heart of these reforms.

Of course, we need to ensure that standards are adhered to and that the legislation relating to work-focused interviews, action plans and directions will apply equally to contractors as to Jobcentre Plus. The same rights of appeal and review will apply. We will work closely with providers to ensure that they understand their responsibilities and that there is consistency in delivery.

2.15 pm

I am aware of concerns that outcome-based funding will result in those customers that may need more intensive help being left behind, or that providers will push people into employment or training that is simply not appropriate. I can assure noble Lords that we will do everything we can, as we are doing in the current Pathways to Work rollout, to ensure that that is not the case.

In provider-led Pathways areas we are asking providers, as part of their bids for contracts, to detail how they will ensure support is in place for all customers. Bids will be assessed by procurement professionals, and an organisation that cannot deliver to the required standard will not be successful. In addition, after contracts have been awarded, Jobcentre Plus will work closely with providers to ensure that the services put in place are fit for purpose.

We will put in place contract management processes to review periodically provider performance, and to ensure that they are delivering the support that we expect. Concentrating only on those customers that are closest to the labour market and easiest to help would clearly fall short of that and will be dealt with appropriately.

By contracting out work-focused interviews, action plans and, later on, directions, we will ensure that these mandatory elements of ESA are fully integrated with the employment support that we offer. Most importantly, we will ensure that the considerable expertise found in public, private and voluntary sector organisations is utilised to the benefit of all customers.

I will try to cover some of the specific questions asked. The noble Lord, Lord Oakeshott, asked for assurances that the Pathways contracts will be in the

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public domain. All current procurement documentation is in the public domain. We will continue to place it in the public domain wherever possible.

The noble Lords, Lord Skelmersdale and Lord Oakeshott, asked whether the contracts encourage providers to help only those people with fewer support needs. I touched on this, but just to emphasise, bids for Pathways to Work contracts for potential providers should include details of the skills and experience which would enable them to address the specific needs and barriers of all customers. Bids will be assessed against that information. In any funding regime based on outcomes, there are risks that the providers will concentrate on the easiest to help. We need to be mindful of that. However, we intend to mitigate that risk as much as possible by reviewing for four months to ensure that that is not the case.

Lord Skelmersdale: Would the noble Lord kindly repeat that? I missed about three words in what he has just said.

Lord McKenzie of Luton: I shall try again. Bids for Pathways to Work contracts for potential providers should include details of the skills and experience which would enable them to address the specific needs and barriers of all customers. Bids will be assessed against that information. In any funding regime on outcomes, there is a risk that providers will concentrate on the easiest to help. However, we intend to mitigate that risk as much as possible by reviewing providers’ performance to ensure that this is not the case.

The noble Lord, Lord Skelmersdale, asked about what happens if a customer moves into work but subsequently reapplies for ESA, and whether providers get a second outcome payment if he finds work again. If a customer returns to Pathways to Work after a spell off benefit contractors can only claim another outcome-based payment for him if they have claimed a sustained payment in between. Providers cannot simply get people into short-term jobs and continue getting outcome payments for them.

The noble Lord asked about the instalments of a 30 per cent service fee. The service fee is 30 per cent of the contract value. It will be spread over the lifetime of the total contract and paid monthly.

The general issue of the nature and structure of payment arrangements was raised and whether there could be payments based on distance travelled. Obviously, a small movement in one customer’s employment prospects would represent a far greater distance travelled than a larger movement in another customer. Setting interim targets can make the distance appear further to some customers. We need also to bear in mind that the ultimate goal here is to enable customers to enter employment with all the financial, social and health benefits that it can bring, and it is, therefore, right that, however far away it may be, employment is the visible goal.

I hope I have addressed each point that noble Lords raised, but I am happy to have a second go if I have not.

Lord Kirkwood of Kirkhope: I beg forgiveness from the Minister and the noble Lord, Lord Skelmersdale, for missing the earlier exchanges on this important

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amendment. However, having listened carefully to the Minister’s reply, would he think further about two issues of concern in this area?

The first is the extent to which we can assure ourselves that the capacity exists for personal advisers in the marketplace generally. From my previous incarnation in the other place, I know that Ministers were honest enough to acknowledge at that stage, which was some time ago, that there was a risk that when work was needed to start, the number of people available to perform that crucial role was not then in place. Can the Minister reassure me that the contractors that we are talking about in this amendment will have access to a big enough body of professionally trained people? That is an important part and we have to be there by “A-day”; so maybe the answer is “not yet, but we are on track”. I would settle for that assurance—it is an essential part of this process.

More generally, given my experience of working with companies in the field, it will be difficult for a level playing field to be created for social enterprises generally and collective third-sector organisations. I would really love—and I tried to persuade some of my colleagues and friends in the third sector at the CPAG annual meeting last summer—them to band together to make a bid for one of these important contracts to see the quality that they could bring to it. There are conflicts between their advisory role, and their independence must be protected, but I would love to see a group of them getting together, because the clients and customers would, perhaps unfairly, feel much more reassured about being in a context where Citizens Advice was built into the provision of the services. The reason why that will be jolly hard is that the big companies—who, I must say, discharge their functions in a professional way and I have nothing against them—have resources behind them that are simply not available for not-for-profit enterprises.

The Wise Group, of which I am a director, is one of those. It lives from year to year on budgets that have to be carefully adjusted on almost a monthly basis, because the money is not there to provide the cushion and the buffer for investment and training. The companies that that organisation will be competing against for these contracts will be dealing in bulk, will have economies of scale, will have very deep pockets indeed and if it is left simply to the marketplace, it will be very difficult for innovative, creative, and genuinely interested new groups of people to try to enter this important area without large resources behind them. When I ask them what the Government need to do to put that right, they say they need development grants of capital, involving some shareholding in the company; I do not know whether that would work as it would be difficult for the Government to start buying interests in social enterprises.

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