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Many organisations, including the RNIB—I declare an interest in that I am its chairman—welcomed the changes to incapacity benefit. Indeed, the RNIB welcomed the ending of registered blind people’s automatic entitlement to incapacity benefit. We welcomed it because we believe that, with the right help and support, blind people are eminently capable of working. However, we adopted that position on the basis that the Government would ensure that new claimants and current claimants in future moving from incapacity benefit to employment and support allowance would not be financially disadvantaged.

I am now greatly concerned that blind and other disabled people will face a reduction in their income, even though they will be expected to take part in work-related activity. Again on this issue, I quote Jim Murphy MP, the then Minister of State for Employment and Welfare Reform in the other place, who responded to a Written Question from the honourable Member for Inverness, Nairn, Badenoch and Strathspey. That sounds like a row of old malt whiskies. He said:

The Government speak of rights and responsibilities and of striking the right balance between duties on claimants and their right to a secure income that means they are free from poverty and able to meet their needs, but in these regulations the Government have failed to meet their responsibilities to provide claimants with a realistic income in return for new obligations to engage in work-related activity. They have a good record in extending the civil rights of disabled people, so it is a great shame that this record could now be damaged by regulations that will lower the income of disabled people who face significant extra costs because of their impairment, as well as some of the greatest challenges to gaining and retaining work.

The income drop for some may appear small at around £1.85 per week, but for disabled people on fixed incomes, who face rapidly increasing food and energy costs, even a small drop in income can have a profound and serious impact and lead to poverty. I do not see how such a move can be compatible with the Government’s public service agreement targets, particularly Agreement 15, which covers disadvantage experienced by disabled people. I am also concerned that there will be a significant impact in relation to Agreement 9 on halving child poverty. It is known that, before housing costs are taken into account, 25 per cent of all children living in poverty are living with disabled parents. Removing income, however small, from disabled parents cannot make sense if the Government wish to meet their poverty targets.

Lastly, I am concerned about the treatment of disabled students. The regulations stipulate that only students claiming the income-related ESA who also receive disability living allowance will be able to study full time. Again, this goes counter to assurances given during the passage of the Bill that current income support rules would continue to apply, with no additional requirement to be in receipt of the DLA.



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I hope that the Government will listen to concerns about these important issues and take the opportunity to reconsider the serious and justified concerns that have been expressed in many quarters. As the Select Committee on the Merits of Statutory Instruments says:

Baroness Thomas of Winchester: My Lords, I, too, am grateful to my noble friend Lord Kirkwood for tabling this Prayer this evening. No one would think from the sparse attendance in this Chamber that these regulations will play an important part in the lives of thousands of people throughout the country, as has been said. However, the groups which lobby for those on benefits know just that, and many of them have expressed grave misgivings about how the regulations will impact on their client group, some stating categorically—as the noble Lord, Lord Low, has said—that Parliament was misled by Ministers into believing that more money would be available than now, not just by uprating but in real terms, for the support group; that is, those furthest from the labour market. They, and we on these Benches, are very disappointed that this does not appear to be the case.

The laudable aim of the parent Act—the Welfare Reform Act 2007—is, of course, to try to stop new claimants from leaving the paid workforce and subsisting on health-related benefits when, with the right help and support, they could perfectly well do some job. Thereafter, from April 2010, the case list of those already on these benefits will be tackled.

The main concerns of the voluntary organisations in this field include, first, that a reduction in the number of people moving on to the new benefit, ESA, was to be achieved, according to the Green Paper A New Deal for Welfare, by “prevention and proactive intervention”, and not simply through a “narrowing of the gateway” by means of the new, tougher, work capability assessment. This will result in many more people being thrown back, largely unsupported, on to jobseeker’s allowance, with as many as 40,000 more children affected by a family’s fall in income—which, as the noble Lord, Lord Low, has pointed out, will do nothing for one of the Government’s main aims of eradicating child poverty.

It should be said here and now that no one can or should tolerate those who try to cheat the benefits system by feigning or exaggerating illness or disability in order to receive benefits. Whenever such a case is reported in the newspapers, it must make the many thousands of people legitimately on these benefits particularly angry. It must be stressed that those who are the keenest to keep working or get back into some sort of work are often the most afflicted—particularly people with some form of mental illness, whether it be a short episode of clinical depression or a longer term illness.

The charity Mind does not mince its words. It says:

It is entirely reasonable to ask the Government to look again at the mental health element of the WCA, perhaps doing what Mind has called for by commissioning independent specialists to assess each criterion of this element of the WCA and the weighting attached to it to determine if it is as fair as the Government say it is. Will the Minister give an undertaking to monitor this aspect of the work capability assessment as soon as it is operating nationwide?

The second main concern of the voluntary bodies is the injustice of how the two different groups of claimants are being treated, namely those on income-based ESA and those on contributory-based ESA. When I moved an amendment on Report during the passage of the Welfare Reform Bill in March 2007 about service users in receipt of benefits being able to receive the modest remuneration offered for meetings without compromising those benefits, the Minister announced that, in future, those on income-based ESA would be allowed to earn £88.50 per week under the permitted work rules for 52 weeks without losing benefits, to align them with those on contributory-based ESA. This was very welcome. That, however, meant that the income-based claimants had two distinct advantages over contribution-based claimants with no other source of income, namely the disregarding of the permitted work rules for full housing benefit and council tax benefit and the automatic passporting to other benefits such as free school meals. Contribution-based claimants will have a large part of their permitted earnings taken through the housing benefit and council tax benefit tapers which are set at 65 per cent and 20 per cent respectively. Those contribution-based claimants with no other income who are therefore receiving the same rate of benefit as the income-related claimants will have to apply separately for other benefits. This is manifestly unfair. Why should those who have a contributions record but no other income be much worse off than those who do not?

Citizens Advice characteristically offers several practical solutions to this problem. It suggests that contribution-based claimants could still be offered a means test and, if they fulfilled the requirements, would have a marker on their benefit showing they were entitled to passporting, or, alternatively, be offered ESA income-based with the option of switching to ESA contribution-based if their circumstances changed. In any case, it calls for the housing and council tax benefit regulations to be changed to disregard earnings from permitted work.

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There is another important question about permitted work. Currently there are two categories of permitted work, which allow earnings of up to £88.50 a week without the 52-week time limit. These categories are supported permitted work—where people have a support worker whose job it is to help people with disabilities find work—and permitted work PCA—personal capability assessment—exempt. Perhaps the Minister could say whether supported permitted work under ESA will be non-time-limited as at present.



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Turning back briefly to the issue I mentioned earlier of barriers to service-users on benefit being allowed to keep any small remuneration they are offered for helping to design and plan health and social care services, there may be a glimmer of light at the end of this particular tunnel—although I am not holding my breath, to mix a metaphor. Regulation 91 in the ESA Regulations No. 794 sets out the treatment of earnings in such a way that earnings are averaged over a pay period, whether this is monthly, quarterly or longer. I understand that this regulation came about as a result of the commissioner’s decision in a very complex case about supply teaching in 2004. This judgment should mean that service users on benefits can have any money they earn for infrequent meetings “averaged” so that they do not lose benefit by earning too much in a short period of time. Is this the case, I wonder? Does the decision also apply to incapacity benefit, jobseeker’s allowance, housing benefit, council tax benefit or local housing allowance? If so, have Jobcentre Plus staff been advised to treat earnings in this way?

These regulations are being rolled out, as my noble friend Lord Kirkwood said, at a time of extreme uncertainty in the economy. Those at the margins of the tougher medical tests are going to have to compete for jobs with many in the existing workforce who have lost their jobs in the credit crunch. The knock-on effects could be severe. The last thing that people with any kind of disability need is to find themselves even more poverty-stricken than they were before. Are there really enough jobs in the workplace for a lot of extra and quite vulnerable workers? How many more job vacancies are there now compared to the number of people looking for work?

Finally, I must say a word about the complexity of these benefits. The Merits of Statutory Instruments Committee, of which I am a member, says in its summary:

It repeats that advice later on, saying that it is difficult to work out the interactions between the different components of the regulations. Hear, hear, is all I say. Are the Government confident that Jobcentre Plus staff will be sufficiently familiar with the new rules by the autumn to operate the system?

Lord Taylor of Holbeach: My Lords, I thank the noble Lord, Lord Kirkwood, for laying these Prayers and initiating a necessary revisit to this important government programme. As has been said, the written evidence to the Merits Committee on these regulations covers some 22 pages of report. Notwithstanding the memorandums from the Department for Work and Pensions, as the noble Lord, Lord Low, has said, evidence has come from the Disability Benefits Consortium, Citizens Advice, the Chartered Institute of Taxation, the Child Poverty Action Group, the Disability Alliance and Leonard Cheshire Disability.

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They draw attention to the gap between the Government’s originally declared intentions and the consequences of the regulations. There is a powerful sense of bad faith.

The new employment and support allowance will be paid to those whose health or disability affects their ability to work and is designed to replace incapacity benefit, the severe disablement allowance and sickness-related income support. We have supported the Government’s strategy to reduce the number claiming benefit and at the same time to help people back to work. So far, so good. However, it is clear from the submissions that while there has been an extensive consultation with stakeholders, the regulations do not match with the Government’s undertakings. Above all, their very complexity means that claimants will find it difficult to understand how they operate, as the noble Baroness, Lady Thomas, has pointed out. Whatever happens, the Government will need to do more to explain how it will all work and address the concerns of interest groups if they are to enlist their active partnership in helping claimants to understand the new system.

In particular, there is a widespread view that the rate of allowance for single people—£89.50—does not exceed the current rate of incapacity benefit. That is contrary to undertakings given during the course of the Bill. The noble Lord, Lord Low, made that point powerfully. Does the Minister accept that criticism? There are also considerable consequences following on from the interaction of the allowances with the income tax system. These may well work, in a way, to reduce the incentive to return to work. What is the impact on claimants of the abolition of the 10p tax rate? Has the department modelled the likely changes in the annual cost of the scheme as a result of the latest announcements on tax allowances? As the Minister will know, those are but for one year. What will be the consequences for many claimants if the tax allowance changes are not continued?

There are further anomalies between those who come to the ESA based on national insurance contributions and those who do not, as the noble Baroness, Lady Thomas, has pointed out. How does the Minister justify the different income that claimants will receive? In the same way, there are different treatments of access to passported benefits such as prescription charges, free school meals, legal aid and so on. If the ESA is income-related then the right to those benefits will be automatic, but for those on a contribution-based ESA, each of those benefits will be subject to a separate means test. I note that housing benefit and council tax benefit are an automatic entitlement either way, but how does the Minister justify the discrepancy in entitlement elsewhere? Does he feel at ease that this accords with the spirit in which he introduced the Bill? Furthermore, does the Minister feel that the way these regulations are drawn will attain the Government’s objectives in providing support for those with disability on a fair basis and help such people back to work?

Finally, can the Minister put various figures on the record? What is the annual cost of the programme? What assumptions are made about the number of people who will be successfully back in work? Are savings to the Treasury envisaged and, if so, what are

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they? The Minister will deny that cuts are the objective. Can he tell us, therefore, what percentage of savings will emerge as reinvestment in that programme? I suspect that for the Minister the lesson is: get your deal with the Treasury before introducing legislation.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, I start by thanking the noble Lord, Lord Kirkwood, for initiating this debate. I hope that at the end of it he will feel able not to press his Prayer against these regulations because they are very important. A lot of individual points have been raised and I will try to deal with as many as I can in the time allotted, but I reject absolutely suggestions that the Government have not acted in good faith on these matters. I will explain why over the next 10 or 15 minutes.

The three sets of regulations before us are an integral and essential part of a comprehensive package of wide-ranging welfare reforms. The Government have undertaken a series of reforms to address the issue of unemployment. While these have had considerable success, those on incapacity benefits have not shared in that success to the extent that we would wish. This House will be aware of the scale of the problem we need to address. In 2003, after an inexorable rise over the previous three decades, the number of working-age people on incapacity benefits reached a peak of more than 2.7 million. This neglected group of people represented an unacceptable waste—lost opportunities for the individuals concerned, damage to families and local communities and a loss to the wider economy.

Also in 2003 the Government introduced their first Pathways to Work pilots, demonstrating our commitment to help those on benefits because of a health condition or disability. We wanted to give those who could work a chance to regain employment and become independent. Pathways to Work provides a holistic package of support, combined with a reasonable measure of conditionality to ensure engagement with that support to make a return to work. The pathways measures have been successful with more than 64,000 people helped into work to date. That is why pathways has now been made available to people on incapacity benefits throughout the country, representing an investment of £1.1 billion over the next three years. To listen to most noble Lords tonight, you would think the Government were cutting back on their programme rather than investing £1.1 billion as part of the current Comprehensive Spending Review for Pathways to Work.

Implementation of the employment and support allowance later this year will provide the legislative framework to allow us to build further on the success of pathways, and together with the cross-government health, work and well-being strategy engaging with employers and healthcare professionals, ESA will be a key part of the next steps towards our aim to reduce the number on incapacity benefits by 1 million. There is nothing sinister about trying to reduce the number of people on incapacity benefits. It is a question of making sure that people have the opportunity to realise their potential. That may be characterised as trying to get cuts in benefit expenditure but it has the positive attribute of helping people to have a more fulfilled life, and we are proud of that.



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I acknowledge the concerns expressed during debates last year, particularly on ensuring fair treatment for the most severely disabled and the most vulnerable people on the benefit. I believe that these regulations provide a reasonable balance. They place proportionate requirements on those best able to meet them with appropriate help, while giving greater financial security to those who need it most and providing the support to participate voluntarily to ensure that we do not exclude the most vulnerable. Some of the key regulations will be familiar to the House from the draft regulations we made available last year. Noble Lords will know that we are able to look in some detail at the regulations dealing with the work capability assessment, the work-focused interviews and the related conditionality requirements.

We have also taken forward into the ESA Regulations many aspects of the regulations that apply to incapacity benefit and income support, but only where they clearly fit with our aims for the new benefit; for example, those dealing with income and capital linking rules, help with housing costs and urgent cases. We have also taken the opportunity to introduce flexibility where it will help people return to work; for example, in relation to permitted work, advance awards and payments for less than a week.

At the heart of these reforms is a determination to change the attitude that people on incapacity benefits are effectively written off. Instead of the concept of incapacity for work, ESA entitlement will be based on limited capability for work. Most claimants of ESA will be expected to engage with a personal adviser to discuss possible steps towards their eventual return to work.

These regulations give effect to the new work capability assessment for ESA claimants resulting from the review of the personal capability assessment that applied to claimants of incapacity benefits. Noble Lords, including the noble Baroness, Lady Thomas of Winchester, and the noble Lords, Lord Kirkwood and Lord Low, said that this was a tightening of the gateway. The new work capability assessment is a fairer and more accurate test of capability. Therefore, it is right and proper that we apply it across the board. We must have an assessment that is transparent and used universally. I remind noble Lords that in 2005 there was absolute consensus that the old PCA needed updating and as a Government we launched a review of the assessment using experts and stakeholders from the disability community. We accepted the findings of that review and we have committed to Parliament that we will report on the new assessment in the first five years of its operation.

The noble Baroness, Lady Thomas, asked about those with mental health conditions. The new medical assessment will deal more effectively with the types of conditions that are prevalent today and lead to assessments that are more equitable for groups with different impairments. The changes to the mental function assessment will address a current gap in the assessment of cognitive and intellectual function in conditions such as learning disability, autistic spectrum disorder and acquired brain injury.

The noble Lord, Lord Kirkwood, talked about fear and uncertainty around all these regulations, and the noble Lord, Lord Taylor, addressed the same point.

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We have already begun communicating with staff, customer representative organisations and other stakeholders to raise awareness about the ESA regime and create understanding about what it will achieve and how it will work. Our communication with customer representative groups and other key external stakeholders is based on the long-running and fruitful engagement led by Ministers and officials during consultation. This has been supplemented by ESA regional briefings and slots within national forums for key stakeholder groups.

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