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Again as I advised noble Lords during Committee, as part of their response to the report of the Health Select Committee on NHS charges, the Government undertook to explore the possibility of accessing free prescriptions without the need to make a separate low-income scheme claim—a significant point. This will be looked at as part of the overall review of prescription charges. The noble Baroness, Lady Thomas, highlighted the complexity of prescription charge exemption. Looking at the list that she took us through and at all the different exemptions, it is clear that a significant review needs to be undertaken, and the Department of Health is undertaking such a review. However, when doing this, we need to be mindful of getting the balance right. The challenge is to find a way of identifying those with low incomes and ensuring that our information is up to date as people's circumstances change without being overly bureaucratic or intrusive. The Government will report the outcome of this review by this summer.

In addition, as I said in Committee, the Government have agreed that, to make it easier for customers to meet the cost of annual prescription pre-payment certificates, they will be available through monthly direct debits from July 2007. At the same time, four-month pre-payment certificates will be replaced by lower-cost three-month pre-payment certificates, something for which I know stakeholder organisations have been campaigning for many years.

I just wanted to pick up on the point about sanctions. If a customer’s state of health or his physical or mental condition prevented him fulfilling a particular requirement and if this was a result of not having a prescription medication, that could count as a good reason for not attending. There is no

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reason why someone on low income should be unable to obtain a prescription; that is what the low-income scheme is for.

In the light of the reassurances that I have given, I hope that the noble Baroness will consider withdrawing her amendment. I appreciate that she is highlighting a very important and complex issue for people with significant health needs. I hope that, through the review of prescription charges, some of these issues can be further aired.

Baroness Thomas of Winchester: My Lords, I thank the Minister for that very full explanation. I should like to add two things. First, I gather that it is the Department of Health that issues the low income forms. I hope that it will ensure that the forms are as simple as possible, because that is one of the problems.

Baroness Morgan of Drefelin: My Lords, as I recall, that is precisely what the review is about, as well as simplifying the process and other matters. I hope that that helps the noble Baroness.

Baroness Thomas of Winchester: My Lords, the other matter, which takes us back to an earlier amendment, is that jobcentres must tell people about the low-income scheme, particularly those on the contributory strand, who may be only marginally better off than those on the income-based strand. They should be told that this is available so that everybody knows about the low-income scheme.

Again, I am glad to welcome the review and I hope that there will be a report to Parliament so that we can see its result. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [Employment and support allowance: supplementary provisions]:

Baroness Meacher moved Amendment No. 50:

“Holding periods

The noble Baroness said: My Lords, the purpose of the amendment is to clarify the procedures which would remove one of the most powerful disincentives for ESA claimants to strive to find a job. At present, the linking rules look helpful on paper but sadly do not work in practice.

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Under the current rules, if an IB claimant accepts a job but within a two-year period loses the job, if they wish to reclaim IB they must contact a call centre, which will forward a relatively short application form to the claimant. The form must be completed correctly—I believe, not surprisingly, that a lot of them are certainly not completed correctly—and returned to the jobcentre. The claimant will then be invited for interview and asked to bring with them a number of documents to prove identity and any change of circumstances. In reality, a claimant with a mental health problem who has just lost a job will not be in any kind of state of mind to organise themselves to complete the reclaim process effectively. Lots of delays and confusion can be expected before benefit is restored, if at all. The target time for completing the process for reclaiming IB, but not, I emphasise, housing benefit, is 18 working days from receipt of the completed application form. In reality, taking into account delays and errors, which may well be down to the claimant, two to three months can pass under the linking rules before benefits are restored.

I mention housing benefit because until now the linking rules have not applied to that. I know from our front-line staff in East London and City Mental Health Trust that, for people with mental health problems, this often causes chaos and risk of eviction, which will be avoided only by intensive and highly time-consuming work on behalf of mental health staff.

The amendment provides a solution to these problems. It would remove the fear experienced by any mentally ill person contemplating taking a job and relinquishing the safety net of benefit. Any claimant knows that they face stigma and uncertainty when taking a job, and if they then fail and lose the job, they will have intolerable uncertainty and lack of money before benefit is restored. The amendment provides for the situation where a person with a mental health problem takes a job and subsequently loses it. A letter from a responsible clinician certifying that the person was once again out of work and in need of benefits would trigger renewal of benefit payments immediately. Paragraph 4(1) of Schedule 2 states that a second period out of work within,

It is precisely that spirit that, I believe, supports the amendment. It makes clear that the usual safeguards against abuse under the linking rules should apply. However, these safeguards would be applied during an initial holding period while the new ESA is being paid. The restoration of benefit would thus not be delayed while these procedures were followed. Quite the opposite: benefit would be restored for a holding period of perhaps three months immediately. As benefit was restored a form would be sent to the claimant to confirm the date of leaving the job, efforts would be made to ensure that the form was completed and returned, an interview would be organised, and so forth. In other words, everything could continue just as it does now, but you would not have the intolerable delay before any money is paid while the processes are pursued—and the poor old claimant makes all sorts of mistakes involving a lot of delay.

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This reform could be introduced to apply only to a period of perhaps six months from the date of taking a job. The linking rules apply to a two-year period. From discussion with the Minister and officials, I understand that over a two-year period you could expect some considerable change of circumstances, which could make this whole process rather complicated. This would ensure that the individual circumstances are unlikely to have changed dramatically. Changes of circumstances between the original period of claim and the subsequent holding period could perhaps be ignored on the grounds that the period out of work was treated, as it says in the schedule,

That would be difficult to justify if the two periods were very far apart. I know that the Minister fully appreciates the problems that the amendment is designed to deal with, and I hope very much that he will feel able to support the amendment. I beg to move.

Baroness Thomas of Winchester: My Lords, we support the amendment. The linking rules are extremely welcome, particularly the relatively new 104-week linking rule, which I understood was introduced after much lobbying from disability groups and the intervention of the Social Exclusion Unit. However, as the noble Baroness, Lady Meacher, said, there is quite a time-lag between a person qualifying for the benefits they were on before working and the payments actually coming through. The amendment would ensure that benefit payments could be paid much more quickly so that the claimant did not get caught in a web of bureaucracy.

A person who has been on ESA for quite a long time is more likely to plunge into the world of work if they know that, should their condition deteriorate, it will not take them long to return to benefits.

Lord McKenzie of Luton: My Lords, we believe that people with mental health problems and those with fluctuating conditions who move between benefits and work need to have their benefit position properly protected. I fully appreciate the concerns that noble Lords have raised about this important issue.

The linking rules protect people receiving benefits because of incapacity for work—or, in the future, limited capability for work—who leave benefits and then find they need to return to it. The linking rules are designed to enable people to return to the same position on benefit as when they left it. The rules apply to incapacity benefit, income support, housing benefit and council-tax benefit, and they will also apply to ESA.

Last October, in response to concerns about the complexity and the scope of the linking rules in incapacity benefits, we simplified and improved the rules in four ways. First, the long-term linking rule period for people who have been incapable of work for more than 196 days and who leave benefit for work or training was doubled from 52 weeks to 104 weeks. Secondly, work or training that starts within a month of the benefit ending counts for the

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purpose of this rule, instead of that which starts within one week, as was previously the case. Thirdly, we have removed the requirement for a customer to provide formal notice at the point they leave benefit to start work or training. Prior to last October it was possible that some people would not qualify for protection because of this notice requirement. Instead the information about work or training will be gathered when a new claim is made. Fourthly, customers returning to benefit now requalify for the long linking rule immediately. They no longer have to spend a further 28 weeks on benefit before using the long linking rule again.

We believe that those significant improvements provide considerable reassurance to people making the transition from benefit to work or training, which is so important if we are to fulfil our aspirations for reducing the number of economically inactive people. I fully appreciate the noble Baroness’s concerns about people with mental health problems having difficulty in coping with a return to benefit when a job does not work out, but a fully automatic system would not be appropriate. It is important to check that the customer’s circumstances have not changed substantially so that we can make sure that they receive the correct amount of benefit. If we did not undertake these checks, it is possible that vulnerable people may be asked to live on levels of benefits below their proper entitlement.

Under the existing system, when a person returns to benefit and the linking rules apply, no referral is made for a personal capability assessment until 13 weeks have elapsed. Benefit is awarded on the basis of a medical certificate from the GP, provided that all the usual conditions of entitlement are met. At that stage, further specialised information about a person’s mental health, such as from a psychiatrist, would not be needed for a benefit award, though further information may be sought after 13 weeks as part of the normal referral process for a personal capability assessment. We intend to carry forward this part of the existing system to ESA, thereby making part of the amendment unnecessary. In addition, it is important to realise that the linking rules will return a customer to the same place within the benefit; for example, someone returning to benefit via the linking rules would not need to serve the assessment phase again, provided he had completed it when previously on benefit.

Last October, we also made further improvements to the claims process for benefits and extended the rapid reclaim process that applies to income support and jobseeker's allowance to incapacity benefit. People claiming incapacity benefit are able to make their new claim on a shortened rapid reclaim form if they have claimed incapacity benefit within the past 12 weeks and there has not been any relevant change of circumstances since their last claim. We intend that this new process will be carried forward to employment and support allowance. In addition, we have arrangements in place for representatives to make claims on behalf of customers where a person is unable to look after his own affairs. This is particularly important for customers with mental health problems. Although improvements have been

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made, we cannot remove completely the requirement for people to provide a statement of their circumstances so that entitlement can be established accurately. This is important to us in our desire to reduce error and important to customers to ensure that they are not missing out on any potential entitlement. Finally, we are also improving the linking rule further by extending the existing short linking rule to 12 weeks for ESA customers.

We believe the current arrangements strike a sensible balance, but we are conscious of the concerns expressed and the practical points raised, particularly by the noble Baroness, Lady Meacher. We continue to look at other ways of improving the claims process. I hope the noble Baroness feels able to withdraw her amendment.

Baroness Meacher: My Lords, I thank the Minister for his comments. It is regrettable that he did not address the consequences of the two to three months’ delay before people can retrieve their benefits. That is what happens; therefore, there is an inevitable disincentive for people, particularly those with fluctuating disorders and severe mental health problems, to search for work with some kind of commitment. I am bitterly disappointed that he does not feel that the matter is sufficiently important in delivering the Government’s welfare reform strategy to make this relatively minor adjustment so that the necessary checks could be undertaken after the benefit is restored.

Lord McKenzie of Luton: My Lords, the Government want this to work. That is why the linking rules are in place. We will continue to look at these things to see what further improvements may be possible. I do not see how we can move away from at least the requirement to make a claim, which is a key part of the benefit. However, I am not dismissive of the practical points that the noble Baroness raised, nor are my colleagues in the Government. We will continue to see what we can do to make sure these rules work effectively, which is what they were designed to do.

Baroness Meacher: My Lords, with those assurances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Morgan of Drefelin: My Lords, I beg to move that further consideration on Report be now adjourned. In moving this Motion, I suggest that Report begin again not before 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.

Income Tax Bill

7.35 pm

Lord Davies of Oldham: My Lords, I beg to move that this Bill be now read a second time.

The Bill rewrites the core provisions of our current income tax legislation. It has been produced by Her Majesty’s Revenue and Customs tax law rewrite

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project, which is working to rewrite our direct tax legislation so that it is clearer and easier to use. I should explain to the House that the Bill has been certified as a money Bill. It was introduced into Parliament in another place at the beginning of December. Under the special procedures applying to these tax law rewrite Bills, the substantive debate on Second Reading was held in Committee. The Bill then passed to a Joint Committee where it was considered on 24 January. The Joint Committee, chaired by Kenneth Clarke MP, includes among its members the noble Lords, Lord Newton of Braintree, Lord Blackwell and Lord Goodhart, the noble and learned Lord, Lord Millett, and my noble friends Lady Cohen and Lord Haskel. I am grateful to them for their efforts in scrutinising the Bill. The Bill then passed back to the House of Commons to be debated at Third Reading and has now come to this House for its remaining stages, which the rules say can be taken in one day.

This is the third rewrite Bill to venture into the realm of income tax. Once enacted, it will complete the project’s work on income tax. In particular, the Bill deals with the basic provisions about the charge to income tax, including income tax rates, various reliefs and the calculation of tax liability.

Before I say any more about the specifics of the Bill, it is perhaps worth putting it in context by explaining a little about the work of the tax law rewrite project. It was set up in 1996 under Kenneth Clarke, then the Chancellor of the Exchequer. It is a project to rewrite the UK direct tax code, the provisions of which have been enacted over the past 200 years. The principal aim of the project is that the rewritten legislation should be accepted by all the main users as clearer and easier to use. To this end, it proceeds through careful consultation and consensus, in particular through its consultative committee, whose members are drawn from the main representative bodies in the tax world and business. Its work is overseen by its steering committee, chaired by the noble Lord, Lord Newton of Braintree—I am pleased to see him in his place—whose members include parliamentarians from both Houses.

This is the third income tax Bill, but the fourth Bill, to emerge from the project. The first Bill became the Capital Allowances Act 2001, the second became the Income Tax (Earnings and Pensions) Act 2003 and the third became the Income Tax (Trading and Other Income) Act 2005. Those Acts have all been warmly welcomed by tax professionals and other users.

It is beyond the remit of the project to make any changes in the main tax policies, but it can encompass minor changes where they will improve the legislation. Examples of such changes include new provisions to clarify points in the existing legislation, repeal obsolete material and correct minor anomalies. While making the legislation more accessible, the project takes great care to preserve the effect of the present legislation, apart from those minor agreed changes. An important part of the role of the Joint Committee is to scrutinise such changes as are in the Bill to ensure that they are indeed minor.

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During the project’s work on the Bill, 31 consultation papers and a draft Bill were published for formal public consultation. A response document summarising the comments made on the draft Bill and setting out how the project has taken account of them was issued last September. The consultative process is not limited to formal papers, and the project uses other ways to involve users of tax legislation and keep them informed—for example, through informal discussions with interested parties and through its website. The Joint Committee noted the widespread public scrutiny of the Bill as a whole and the minor changes in particular, which are flagged up very clearly in the consultation process. It satisfied itself that all of them are within the remit of the project.

The Joint Committee also carefully considered the amendments to incorporate new material into the Bill about the accrued income scheme before agreeing that those amendments be made. In its report, the Joint Committee noted that, while substantive new material should normally be included in the Bill prior to introduction, there were exceptional circumstances in this case and the clauses had been subject to extensive consultation. The Joint Committee also gave particular attention to Clause 1029, which will confer on the Treasury, for a limited period, a power to undo changes in the law made by the Bill in order to restore the law to what it was before the Bill came into force. This is similar to the power to make consequential amendments included in the previous rewrite Bill, in that it allows amendments to be made to correct the Bill without having to use primary legislation. This new power will, in particular, enable inadvertent changes to be corrected without the need for recourse to a Finance Bill. An undertaking has been given in another place that orders will only be introduced under this power with the agreement of the project’s committees.

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