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A number of noble Lords asked whether we unduly rely on reserves to support operations. Our policy is clear. A primary role of the Reserve Forces is to augment the Regular Forces on enduring operations. There was a peak of reserve force usage during the early stages of our operations in Iraq, as would be expected. Since then the level of mobilisation has reduced and stabilised. The Reserve Forces have actually enhanced their reputation through the quality of their contributions and I do not think that we are placing excessive demands on them. More importantly, they do not think that we are placing excessive demands on them.

I would like to have spoken about cadets and taken up the points made by my noble friend Lord Clarke and the noble Lord, Lord Wallace, about citizenship and other contributions, but there is no time to go fully down that route today.

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In conclusion, we have had an extremely good, useful and thought-provoking debate. If there are any significant issues that I have not mentioned, I will of course write to noble Lords, but it is important that we place on record our appreciation of the work of the reserves and all of those who support them. My noble friend Lord Hoyle said that C(64) squadron had been given the freedom of the town when they returned from operations. Actions of that kind are proper recognition of the work that our reservists undertake. All the points raised in this debate will be taken on board in this review and, again, I thank the noble Lord, Lord Freeman, for securing this very timely debate.

Lord Freeman: My Lords, I thank all noble Lords who have taken the trouble to participate in this debate. In particular, I thank the Minister for her thoughtful and comprehensive response. That was much appreciated by your Lordships. This has been a fascinating debate with its wealth of experience. Personal, family, community, ministerial and health service issues have been brought to bear. The debate has demonstrated that your Lordships will, I am sure, join me in saying to members and families of Her Majesty’s Reserve Forces, “We salute you”.

I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

Employment and Support Allowance Regulations 2008

4.38 pm

Lord Kirkwood of Kirkhope rose to move, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 27 March, be annulled (SI 2008/794).

The noble Lord said: My Lords, this is an important area of public policy, which has developed apace in the past few years. I am grateful to colleagues for postponing their retirement to the well earned respite of the Whitsun Recess to consider some of the background to this policy, particularly that contained in the regulations.

I am particularly grateful, as I am sure that we all are, to the Merits of Statutory Instruments Committee, which did the House a service in drawing special attention to the regulations and made some quite perceptive comments. The committee thought that the Government needed to address some concerns that it identified when it solicited evidence. I am grateful to colleagues who served on that committee, such as my noble friend Lady Thomas of Winchester, for drawing some of the issues to my attention and to the attention of the House.

Perhaps I may say a word about process. The regulations are serious statutory instruments. They comprise 169 paragraphs and nine schedules. They are subject to the negative resolution procedure, so Members of your Lordships' House have to take special care to ensure that they are debated. They contain far-reaching provision for conditions and

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procedures that govern what will be a very important replacement benefit for incapacity benefit, disability allowance and income-related income support disability benefits.

There should be better provision for detailed consideration of legislation of this importance and scale than the mere negative procedure that we have. Your Lordships could spend many happy hours—not wasting time or indulging in hesitation, deviation or repetition—considering all of it thoroughly. Suffice it to say that the regulations are of crucial importance to a particularly disadvantaged cohort of our communities. Literally thousands, if not millions, of households are dependent on the regulations.

It is not merely a question of rates and procedures. There is an underlying element of insecurity and uncertainty that is corrosive of stability to family life if you are subject to the mental or physical illness or disability that the regulations seek to ameliorate. If you are subject to the conditions and domestic circumstances that they seek to address, there is always the fear that benefit will be withdrawn or changed. That is a real worry and it makes people's lives that much harder if that uncertainty is increased. I fear—I shall seek to make the case in the next few moments—that that may be the effect of the regulations.

I do not want to found my case this afternoon on the merits or otherwise of age additions being withdrawn. I absolutely acknowledge that the department and the Bill team did everything that they could to consult during the passage of the Welfare Reform Act. That was an extremely positive experience for me. I have been doing this man and boy for more than 20 years and have been especially concerned about this aspect of policy. Until the Welfare Reform Act 2007 and the process that preceded it, it was always about cuts and getting people off benefits because they were costing the taxpayer too much money. That is a corrosive background against which to formulate policy.

We need to get people to contemplate a huge change in their lives from the security of a regular income from whatever benefit they receive to the world of work or to take them nearer to the labour market, which is a very demanding place if you have the disabilities that these benefits seek to redress. To do that, we need to win the confidence not just of the disability organisations which are spokespeople for their client groups but the people with disabilities themselves. The profile of the kind of disabilities faced by households in the United Kingdom has dramatically changed during the past 10 years.

The worry now is not that the rates are not right, or that the detail is wrong, though there are arguments about that. My real worry is that these regulations do not deliver on the promises that people perceive were made to them by Ministers as the Welfare Reform Act 2007 went through all its legislative stages. The disability organisations have helpfully provided all of us with reminders of the kind of thing that Mr Murphy, in another place—although he has now moved on to another ministerial

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responsibility—and the Minister said in the course of the Commons and Lords stages.

If we get into a debate about good faith, and the Government lose the trust of those organisations that were happy to work with them in the context of the 2007 legislation, it will destroy the possibility of deploying this policy sensibly and getting to where the Government want to be. They must win and develop the idea that they are acting in good faith; otherwise there is a risk of failure. I do not for a moment mean that Ministers, particularly the noble Lord, Lord McKenzie, were deliberately lying. I understand the argument perfectly well. The department does its best in framing primary legislation, and then engages in a tough contest for the resources to promote and develop it, and to roll it out. Sadly, I think the department did not get the settlement that it needs—and deserved—from the Treasury to roll out this policy properly. There is some substance in the argument that the regulations do not deliver what was promised.

The tone of the debate is in danger of changing. We have new political direction and leadership in the department from Mr James Purnell, the new Secretary of State. I have a high regard for Mr Purnell, but he is starting to use language that is quite tough, and the tone of which is substantially different from that of two Secretaries of State ago, when this legislation was at its primary stage. We are now talking about taking 1 million people off incapacity benefit by 2015. That is a long-term forecast; 2015 is difficult to anticipate because it is some way off. To take 1 million people off incapacity benefit by 2015 sensitively and properly is a tall order.

I am grateful to the department for producing the Explanatory Memorandum, which is very informative. I entirely applaud the fact that Parliament now has access to that level of information. Page 9 refers to savings of £1.1 billion over the next 10 years. Ten years is a long time and £1.1 billion sounds like a lot of money; maybe in public expenditure terms it is not. It begins to sound a little frightening if you read this as somebody dependent on the benefits that we are talking about. It is a reduction of the IB case load by 10 per cent. Ten per cent of the current case load is 250,000 households, which is a large number of vulnerable households.

The other change that I detect is that we are now talking, in a way that we were not during the 2007 discussions, about a tighter gateway being the way to reduce the case load. Intellectually, that was always going to be the case, but the way that this is now being argued is beginning to suggest something else. That is not only because the rates have changed in the regulations that were produced in March, and which we are discussing this afternoon. The provenance of the policy is beginning to sound a lot tougher, to the extent that—and I am not quite saying that we are there yet—we are almost back in the bad old days, with people starting to ask whether the Government, at the back of their minds, are thinking more about saving money than anything else. If we get into that situation, with people back in those bunkers of previous years, it will be a very bad thing.

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In its consideration of these regulations, the Merits Committee captured very well and crystallised on six areas of concern, which the disability organisations submitted as evidence of things it thinks constitute cuts. There is no other way of describing it. That is its language, what it believes and its perception. I am pleased to see that the Merits Committee confirmed, as I said at the beginning, that these six areas still need to be addressed.

That is bad enough, but two issues have made things even worse. The economy—the context in which this policy is being rolled out—will get tougher, which is self-evident. You do not need to be an economist to work that out. The rates at which the benefits are set, being lower than those that were expected, are causing concern. On top of that, we suddenly, as if by magic and out of the blue, get £2.7 billion of tax cuts. You can have an argument about whether that is right or not, but the disability organisations imply that if money of that order were to be applied to this area of policy they would have fewer underlying concerns.

In his work on the net present value of what you would save by taking someone off benefit for eight years, David Freud came to a saving, I think, of £62,000. If the Treasury has any sense, long and middle-term investment of the kind that everyone thought would be poured into this policy area would have significant long-term effects by providing absolutely cast-iron security for those who could not work. It would take away all the uncertainty and difficulties, and would make sure that they could be accommodated comfortably because they would not be expected to approach the labour market in the future. Alternatively, the Treasury could put not just £2,500 per head into the New Deal programme, welcome as it is, to encourage people back into the labour market; it could put £6,000 annually into serious training for people with multiple hurdles and who are a long way from getting close to the labour market. The David Freud agenda looked at that and it was the background against which primary legislation was introduced.

We have received encouragement. I have here an uncorrected proof of evidence. Recently, Adam Sharples, director of the work, welfare and equality group at the DWP, gave evidence to the Commons Select Committee. He said:

That is where the disability organisations and the rest of us thought we were when the 2007 primary legislation was put through both Houses. There is evidence in the submissions of the disability organisations to the Merits Committee that we are heading off that back into the bad old days that we remember with regret as a lost opportunity.

This policy, if it is to succeed, will involve a huge cultural change, not just in the department and in its

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procedures, but for claimants—existing and new—and for employers in order that they may play their part and make available positions for people so that they can find work after they have been through their training, if that is what the work capacity assessment finds that they have to do.

If the Government do not win back the trust of the disability organisations, the whole thing will become harder. For example, the number of appeals is estimated to increase by something like one-third as this benefit is introduced, which of course will apply to everyone after 2010, including existing clients on invalidity benefit. That is a massive underestimate. If we get this wrong and disability organisations take against how the Government are doing this and start to believe—the perception may be real for them; whether it is true, we have to deal with their perception—that the Government are not acting in good faith, then any welfare rights adviser in his or her right mind would obviously suggest an appeal if claimants were knocked back for ESA when they had just been on invalidity benefit. It is a no-brainer. The Government’s estimate of appeals increasing by a third could be massively underestimated.

On the other hand, if we get welfare rights advisers who say, “We think that the Government are trying their best in a difficult situation to obtain the culture change and improvements in lifestyles that we are all aspiring towards”, then we have a different situation altogether. We may be able to get away with an increase in appeals and it may be one-third, but if we get the background and the context wrong then that will be to no one’s benefit.

I want to make three quick suggestions before I sit down. First, the rates need to be addressed in the future. If the Minister said that he would be prepared to deal with some of this in an uprating, we go through an uprating process every year. Every year, people on benefits slip one or two percentage points behind average earnings, because benefits are only price protected and every year, year on year, 2 per cent fall behind in terms of the benefit compared to the average earnings. They are already falling behind before any of this starts to impact on them. Benefit uprating in future has to take account of the fact that these rates need to be addressed.

Secondly, some of these other contentious issues need to be referred back to the Social Security Advisory Committee. It was denied the ability to carry out a full formal report on the regulations, simply because they were under the rules that exist. The statutory instruments came out within a six-month period of the primary legislation. There is some tricky stuff here: it is very technically complicated. The SSAC knows what it is doing. If it wrote a report and came to some conclusions and made some recommendations it would give the disability organisations some comfort. I strongly recommend that the Government think about doing that.

Finally, Mr Sharples mentioned AME-DEL—annual managed expenditure: departmental expenditure limits— the acronym for a deal that has been struck with the Treasury. It makes perfect sense, as David Freud set

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out earlier, that one spends to save; we can invest some of the savings from the benefit spend and put it back into the training and the ESA support rates and allowances. That makes perfect sense to me but there is a lot of opacity about what is being discussed and when we might see its fruits.

The Minister should contemplate whenever the moment is right trying to explain to the outside world what is going on and what is available to the department through its new arrangements for the Treasury. I conclude by saying that if we forfeit the goodwill of the claimants and the disability organisations, this policy area, which is so important to so many people, will be much harder to roll out in the longer term. I beg to move.

Moved, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 27 March, be annulled (SI 2008/794).—(Lord Kirkwood of Kirkhope.)

5 pm

Lord Low of Dalston: My Lords, I am sorry to find myself debating the regulations today because, at the end of our lengthy debates on what is now the Welfare Reform Act, I thought that we had reached a balance between the Government’s policy aims of moving more people off benefit and into work and the concerns of disabled people and their organisations about the changes that would be made to their entitlement to benefit. I have to say that significant concerns have been raised about numerous aspects of the regulations. The Disability Benefits Consortium, the Child Poverty Action Group, the Disability Alliance and Leonard Cheshire Disability have all written to the Select Committee on the Merits of Statutory Instruments about them. In case noble Lords think that these are just the usual suspects where disability benefits are concerned, the list also includes Citizens Advice and the Chartered Institute of Taxation, both eminently reputable and objective organisations—not to say that the others are not, but noble Lords know what I mean.

I cannot help but feel that this situation could have been avoided. During the passage of the Welfare Reform Bill, to their credit, Ministers were responsive to the criticisms made and gave reassurances both in your Lordships’ House and the other place that met the concerns of disabled people and their organisations. It is greatly to be regretted, therefore, that disabled people now feel that in these regulations the Government have gone back on those assurances. In particular, I say that with regard to the rates of the two components of the new benefit. Ministers in both Houses gave clear assurances that the rates of benefit for both components would be above the current long-term rate for incapacity benefit. When questioned about the rates at which ESA would be paid, the noble Lord, Lord McKenzie, who is with us today, said that,

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Yet from the regulations it is clear that the basic main phase rate of ESA for single claimants in the work-related activity group, at £84.50 per week, is exactly the same as the current long-term rate of incapacity benefit, not higher. If that is compared to the equivalent rates of benefit currently payable with income support with a disability premium, the rate is in fact £1.85 per week less for a single person on income-related ESA.

The DWP told the Merits Committee that the Government did not accept that the rates that had been announced were incompatible with statements made to Parliament. It said:

That is casuistry of the worst order. The operative words in that sentence are “at the time the statements were made”. The important point to note is that the long-term incapacity benefit rate will have risen to £84.50 at the time the new allowance is introduced, and then there is the possibility of £1.85 on top. It is conservatively estimated that this will adversely affect 1 million people out of the 1.65 million currently receiving incapacity benefit. Those on contributory ESA will lose entitlement to age additions and additions for spouses. For example, under the current system, someone who became sick under the age of 35 on the long-term rate of incapacity benefit would receive £102.25. Under the new system, they will receive £89.50, a drop of £12.75.

The losses for couples are even greater. A couple where the claimant became sick under the age of 45 on long-term incapacity benefit would receive £143.95. Contributory ESA will pay the same couple a maximum of £123.95, if the claimant is in the support group. But the vast majority will be in the work-related activity group and receive only £118.95. For the most severely disabled claimants, therefore, who have worked and paid NI contributions, the maximum payable under ESA is a good £20 or £25 a week less than under incapacity benefit.

As the noble Lord, Lord Kirkwood, has told us, the Explanatory Notes to the regulations clearly state on page 9 that the new work capability assessment will be a tighter gateway than the present personal capability assessment, so that fewer people will become eligible for ESA, and the Government estimate that more than 90 per cent of ESA claimants will be in the work-related activity group. That will represent a significant saving to the benefits bill. Yet Ministers gave repeated assurances that the introduction of the ESA was not about saving money from the benefits budget.

There are other serious concerns about related benefit entitlements for claimants on the contributory benefit. Citizens Advice has set out in great detail how claimants on a contribution-based ESA with no other income will lose out in terms of being passported to housing benefit, council tax benefit, free prescriptions and other health benefits, free school meals and much more. That is of great concern.

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