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First, on the loss of income for those migrating to the employment and support allowance, the Government have stated that claimants migrating across from incapacity benefit will have their income protected to ensure that they do not suffer any financial loss. Concerns have been raised with me by organisations outside this House that rates of employment and support allowance payable will be significantly lower than those currently paid through incapacity benefit or income support. Those shortfalls will arise because, in the first place, age, adult- and child-dependant additions, currently payable on top of the long-term rate of incapacity benefit, are to be abolished. Secondly, the average rate of incapacity benefit that has been paid is about £20 a week higher than the standard long-term rate, which

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is the level of protected income on which claimants will be moved across to employment and support allowance. The average rate of incapacity benefit in payment at August 2006 was £91.12 a week, against the standard long-term rate at that time of £70.05 a week. Those figures are drawn from DWP statistics.

In addition, any protection of income levels when a claimant is migrated across will last only while that person remains eligible for ESA. It is the position of claimants losing entitlement to ESA under the new personal capability assessment, which is in the process of being revised or transformed, to which I will now turn. Under the new assessment procedure, the three-point descriptors are being removed, which will mean that existing incapacity benefit and income support claimants, especially those with physical health problems, will find it much more difficult to establish entitlement to benefit once they are migrated. Anyone migrated across to ESA who fails to establish entitlement under the new PCA will lose all income protection and will instead have to claim jobseeker’s allowance at £57.45 a week. As well as the substantial loss of weekly income, those claimants will be denied the personalised and individualised support promised for ESA claimants.

Claimants who are migrated across to ESA with income protection and who establish entitlement under the revised PCA will also suffer financially in the longer term, because the income protection effectively acts as a freeze on benefit income levels. On an annual uprating basis, any increase to the rates of ESA will be subtracted from the amount of income protection received, so the Government will effectively be giving with one hand and taking with the other. The overall income will remain unchanged. That will have two effects: first, a person will be driven more deeply into absolute as well as relative poverty, as he will have a static income over a five-year period, while prices, earnings and inflation will all continue to rise throughout the period; and, secondly, it will create complexity of administration and bureaucracy that will be difficult for both the claimant and the DWP to understand in any meaningful way.

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Finally I wish to consider the position of those who at present enjoy transitional income: former invalidity benefit and severe disablement allowance recipients who enjoy transitional protection. In addition to the issues to which I have drawn attention, a number of claimants have residual transitional protection in relation to old claims for invalidity benefit and severe disablement allowance, both now abolished. Invalidity benefit was abolished in 1995 and claimants were subsequently moved to incapacity benefit. Invalidity benefit claimants were given transitional protection, which means that their benefit payments are not subject to income tax; they have an entitlement to dependency additions and they do not have any deductions made with respect to private pensions.

Severe disablement allowance was abolished in 2001 and SDA claimants were moved to incapacity benefit. SDA was paid to claimants who had not paid

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national insurance contributions but had established an 80 per cent level of disability. Those claimants were given transitional protection to enable them to continue to receive benefit even though they failed to meet the entitlement conditions for the new system. SDA has a number of different rules regarding payment rates, earnings rules, entitlement to premiums and so on. What do the Government intend will happen to those claimants, who were guaranteed protection when the respective benefits were abolished? I beg to move.

Lord Skelmersdale: My Lords, this amendment allows me to probe how ESA will affect claimants currently receiving benefits other than incapacity benefit. We have already spoken a little about carers, and the Minister was able to give us some good news on that. My concern now is lone parents. Lone parents who receive income support, with or without a disability premium, are not subject to any conditionality. They are not expected to move towards work readiness, but instead are given the support necessary to be full-time parents.

However, that does not appear to be the case under ESA. We have heard of no exemptions that will apply to lone parents in the work-related group. Presumably that means that a lone parent with a young child will be expected to engage in work-related activities that under other benefits systems would not be required. The options available, therefore, will again presumably be to move on to the higher level of benefit at which we have been assured ESA will be set or to remain on a lower level of benefit but be free from conditionality. Can the Minister confirm whether that will be the case, and, if so, can he reassure us that the decision-maker will be sympathetic to the non-health-related requirements that such a situation may put on a claimant? Will a failure to find adequate childcare be considered a good cause to miss a work-related activity?

As far as I am aware, the draft guidance makes no mention of that sort of situation. It is most important that we hear how the Minister intends it to work. I therefore congratulate the noble Lord, Lord Low, on producing this amendment, which has enabled me to tack on a little extra to what was originally intended.

Lord McKenzie of Luton: My Lords, I thank the noble Lord, Lord Low, for giving us a chance to talk about these important issues and for giving the noble Lord, Lord Skelmersdale, a chance to raise some items in an amendment that he either has not moved or has yet to move. The amendment to Schedule 4 would remove the power to terminate the existing benefit of customers migrating to ESA in particular circumstances. I understand that the thrust of this is as a probing amendment, so that the noble Lord can get the answers that he seeks to the points raised.

I would like to respond to the noble Lord’s specific questions around transitional protection. As we have said, all existing customers will have their cash level of benefit protected, provided that they continue to meet the entitlement conditions to the employment and support allowance. That applies to any customer on

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existing incapacity benefits, whether incapacity benefit, severe disablement allowance or income support paid on the grounds of disability or incapacity, and whatever their original route on to these benefits, such as former invalidity benefit customers.

The noble Lord also asked about those existing customers who could fail to satisfy the new PCA. We are obviously still reviewing and testing the new PCA. Once this has finished we will be in a better position to say what the most appropriate stage to introduce it for existing customers is. We expect that it will be at the first PCA review following migration on to ESA. The new PCA has been designed to assess whether a person has a limited capability for work, which is a condition of entitlement to ESA for all new and existing customers. People who do not satisfy the test will therefore not be entitled to ESA. We believe that this is right and proper. That is because the new PCA has been designed by medical experts to accurately assess people’s health conditions. It would be unfair for existing customers not to be subject to the same conditions of entitlement as everyone else.

This amendment to Schedule 4 relates to our powers around migration of existing customers to employment and support allowance. As we have shown in the amendments already debated, we have been considering Schedule 4 very closely to ensure that we have the appropriate powers to successfully achieve our aims for the migration of existing customers over time, and as resources allow. The reason for this is that the migration of existing customers is a large and complex undertaking. Making sure that the new process is bedded down beforehand will ensure that the migration is as smooth as possible and reduce the risks around such a large project. We wish to learn from our operational experience here.

Schedule 4 is designed so that we can respond effectively to changing circumstances—for example, learning from operational experience in the period of transition for existing customers following the introduction of employment and support allowance. Removing powers in Schedule 4 removes our ability to adapt to circumstances that cannot be foreseen. It would not be appropriate for us to remove this power and risk being unable to respond to changing circumstances.

The noble Lord, Lord Skelmersdale, asked whether lone parents would be required to attend work-focused interviews as an ESA customer. The answer is yes, if they were an ESA customer. However, their caring responsibilities will be taken into account by personal advisers when they arrange interviews. They will be able to defer interviews if the deferral test is satisfied. I stress that some lone parents will continue to be able to choose whether they remain on income support. If their only route is incapacity, ESA would be the route available to them. If they wish to access income support as lone parents. they also have that choice. They can make a judgment as to the value of the benefits and the conditionality, and the support that is offered by the two streams.

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I reiterate that to the noble Lord, Lord Low. Not unreasonably, his questions focused on levels of benefit, but we should recognise that the new system is one which provides significant support for people which was not there before. We have to look at the balance of the package. That support seeks to enable people to move into work or closer to work, to eventually meet their aspirations as individuals. Those aspirations have been denied and neglected for too long. That is what the new system is about. You have to look at the balance of the allowances together with the support that will come with the new ESA regime.

I hope that that has dealt with the questions from the noble Lord, Lord Low, but I will be happy to answer further if he feels that I have missed some points.

Lord Low of Dalston: My Lords, that is encouraging and reassuring. I draw particular comfort in relation to my first and third questions from the Minister’s assurance that people will be migrated on a protected income equivalent to their existing cash benefit. The sting in the tail came when he said, “provided that they qualify for ESA”, although there was further assurance when he said that the assessment of whether they continued to qualify for ESA would come at the first review after migration. I understood that to mean that there would be migration on existing cash benefit, which would be subject to review at a later stage. These are technical matters, so I will reserve judgment until tomorrow, when I have studied carefully all the Minister’s words. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McKenzie of Luton moved Amendments Nos. 69 to 80:

(a) incapacity benefit under section 30A, 40 or 41 of the Contributions and Benefits Act,

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(b) long-term incapacity benefit under regulation 11(4) of the Social Security (Incapacity Benefit) (Transitional) Regulations 1995 (S.I. 1995/310) (former sickness benefit), and (c) invalidity benefit which has effect by virtue of regulation 17(1) of those regulations as if it were long-term incapacity benefit;

On Question, amendments agreed to.

Clause 29 [Local housing allowance]:

Lord Best moved Amendment No. 81:

The noble Lord said: My Lords, this amendment seeks to reduce youth homelessness, remove disincentives for young people to leave hostels and supported housing and to get jobs, and to enable vulnerable young people to obtain and retain somewhere to live. It would achieve those results by moderating the impact of the controversial single room rent, in future to be called the shared room rate, which limits the amount of housing benefit for those under 25 and creates a shortfall between what a tenant must pay in rent and the benefit they receive.

The Government’s overhaul of the housing benefit system, with the introduction of local housing allowances after proper evaluation of its Pathfinders, is very welcome but, in respect of younger people, the arrangements continue to be flawed. I hope to demonstrate that the Government’s insistence to date on retaining the highly problematic shared room rate is based on a misunderstanding of the ways in which the private rented sector is now working.

The amendment’s progress has exemplified very well the revising role of this Chamber. Noble Lords have brought their knowledge and presented expert evidence from concerned organisations outside this House—in this case, Shelter, Citizens Advice, the Scottish Council for Single Homeless, the YMCA, Centrepoint, the Foyer Federation, the British Property Federation and others. The amendment also takes account of discussions in the other place and represents a compromise from the amendment proposed there.

After the Committee stage provided the opportunity for a detailed discussion with a powerful speech from the noble Earl, Lord Listowel, and support from the noble Lord, Lord Oakeshott, and others, and after a helpful meeting with the Minister, I am returning to the issue with some hope of persuading him that it would be entirely sensible for the Government to take this amendment on board. I am encouraged to be optimistic by hints from the relevant government department—the Department for Communities and Local Government—which is responsible for homelessness policy. Earlier this month, that department published its policy briefing,

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Tackling Youth Homelessness. This draws attention to the problems created by the single room rent and concludes:

In the hope that the Department for Work and Pensions may be able to assist the Department for Communities and Local Government on this, perhaps I could spell out the reasons why I believe that the objections to this amendment are unfounded. It is said that if housing benefit covered the rent for a self-contained flat, those under 25 would reject shared accommodation and go for the more expensive option of their own flat. This would not only cost the state more but would put the individual deeper into the poverty trap, with a level of benefit that they could not match if they got a job. Moreover, it would mean that those on benefit were enjoying higher housing standards than most young people in work, the majority of whom are in shared accommodation.

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This analysis misunderstands the realities of the housing market. It is possible for someone on housing benefit to obtain shared accommodation only if landlords let this form of housing to housing benefit claimants. In some areas, there is no tradition of shared lettings—for example, in parts of Scotland and in many rural areas—so such accommodation simply does not exist. Elsewhere, where there are such lettings, these are seldom available to those on benefit. In a recent Shelter survey of landlords in Brighton, only 15 per cent were willing to let to anyone on housing benefit, let alone to those under the age of 25. In most places where landlords are letting shared housing to a group of young people, there are plenty of students and young professionals needing accommodation, reflecting the decline in the number of first-time buyers in today’s overheated market.

As a father of four young people who have all occupied shared accommodation in the private rented sector in four different places, both while at and after leaving university, I am very familiar with this market. Landlords like these tenants because parents such as me can be required to act as guarantors of the rent and will often help with a deposit and rent in advance. By contrast, landlords do not want the risky prospect of someone on housing benefit, particularly if that very low income tenant faces a shortfall between his rent and his benefit. Many landlords blatantly declare, “No DSS”— “No DWP” has not yet caught on—while the others are very likely to deploy the same policy without announcing it. There are other factors relating to the supply of shared housing for benefit claimants.

Becoming part of a group of flat-sharers is natural and easy for my children and their friends. It is utterly different for the lone individual—someone leaving prison, leaving a violent partner or leaving specialist accommodation. Where an existing group of tenants is looking for a fellow housemate or sharer, the Shelter survey shows that only 7 per cent would ever consider, let alone accept, a housing benefit claimant to join them.

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Meanwhile, there have been big changes in the private rented sector over recent years, as research at York University has shown. The number of lettings in the old HMOs—houses in multiple occupation—has declined; many have been converted into self-contained flats. The Housing Act 2004 is now beginning to bite with its requirements for higher health and safety standards for HMOs, so the current decline is likely to accelerate. Conversely, there has been an explosion in the development of small flats through the phenomenal growth of the buy-to-let market. Saturation has been reached in some towns and cities, with small self-contained flats standing empty but beyond the reach of the under-25 year-olds, however great their needs, because of the shared room rate restriction.

Do the statistics confirm the dearth of available shared accommodation for those on housing benefit? The answer is a resounding “yes”. After the introduction of the single room rent a decade ago, the pressure to go into shared housing would lead one to expect a rise in the numbers moving into this kind of accommodation, but the facts show the exact opposite. Numbers have fallen dramatically from 33,000 people in 1997 to about 12,000 today. In part, as the noble Lord, Lord McKenzie, suggested, this may reflect the fall in the number of unemployed young people, but the fall in shared lettings to housing benefit claimants also comes at a time of increased homelessness, which strongly suggests that those at the bottom of the economic ladder simply cannot find any shared housing for which they can obtain the requisite housing benefit.

Helpfully, the definition used for the new shared room rate for the local housing allowance is broader than for the single room rent in the past, but the DWP’s research in the local housing allowance Pathfinder areas shows that, in fact, this well intended change has not made any difference. While there are self-contained flats with the level of housing benefit capped in the new scheme at the median, preventing any extravagance by tenants, shared housing, however it is defined, is not there for claimants to find.

What about those who are already in a flat, paying their own way, who lose their job? Because of the shared-room rate, they will be expected to downsize into shared housing while they seek a new job. Since we know that the chances of finding such housing are remote, they will probably have to stay where they are and face shortfalls in their rent, which will virtually halve their income from jobseeker’s allowance. This, of course, is a recipe for arrears, eviction, then homelessness. The chances of getting back into work are dramatically reduced by this unreasonable and unrealistic benefit restriction.

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