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Grand Committee

Thursday, 6 October 2011.

Arrangement of Business


2 pm

The Deputy Chairman of Committees (Lord Haskel): My Lords, if there is a Division in the Chamber while we are sitting, this Committee will stand adjourned for 10 minutes as soon as the Division Bells are rung. It might also be helpful if I tell noble Lords that the microphones work automatically. There is no need to turn them on and off.

Welfare Reform Bill

Committee (2nd Day)

2.01 pm

Clause 1 : Universal credit

Amendment 2

Moved by Lord McKenzie of Luton

2: Clause 1, page 1, line 7, after "credit" insert "to support work for those who can and provide security for those who cannot"

Lord McKenzie of Luton: My Lords, Amendment 2 seeks to attach a clear but succinct purpose to the universal credit; that is,

Much of the focus of our discussion about the universal credit is on the former, helping people into work and closer to the labour market, but there is an obligation also to help those individuals and families for whom work is, for one reason or another, not currently reasonably practicable. We subscribe to the view of the importance of work in helping people out of poverty, in the development of their self-esteem and, as per Waddell and Burton, as being generally good for their health. This has the potential to translate at the macro level to the prospect of lower benefit costs, higher taxes and national insurance and, other things being equal, higher growth. That approach characterised the reforms, which I will call welfare reforms notwithstanding our discussion last Tuesday, of the previous Government and this Bill is a significant development of that trend. Of course, the Minister has been present in both of them.

Contrary to popular belief, it might be contended that receiving financial support from the state when unemployed and unable to work is harder now than at any time for 60 years-that is certainly the view of the Child Poverty Action Group-because the eligibility criteria for benefits have been heightened, benefits are more conditional on actively seeking work and there are tougher sanctions for non-compliance. Some of this happened on our watch as a Government and

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universal credit provisions go further and, in some respects, too far. We will discuss this when dealing with later clauses, but we support the concept of good and clear work incentives. We also support the requirement for those who can work to meet their obligations. There are some who need to rely on benefits and who do not lack the motivation to work, who see the benefits of work even with existing incentives. As we go through the Bill, we will seek to test that the new universal credit works for them also. These include those with caring responsibilities and health conditions, but also those who simply cannot get a job, be they from Bombardier, BAE systems, or, indeed, anywhere else.

It is worth reminding ourselves of what has gone before. If we look at the recent history of welfare reform, the Welfare Reform Act 2007 introduced the employment and support allowance and the personal capability test; the report of the noble Lord, Lord Freud, focused on the large-scale marketisation of employment services; in 2008 we saw the employment and support allowance introduced; we saw lone parents move off income support and onto jobseeker's allowance and flexible New Deal pilots introduced to replace the New Deal 18-24 and New Deal 25+. The Welfare Reform Act 2009 established a structure for the future abolition of income support, the progression to work conditions for lone parents and partners of unemployed people, and the extension of work-related activity for employment and support allowance recipients. So hitherto an increasingly active regime has been developed. As I say, we support the concept of good and clear work incentives. We also support requirements for people to meet their obligations.

Of course, the "work first" approach is not the only model of support that countries have adopted. The "human capital development" approach would be claimed by some to be a more effective approach. The Minister often talks about universal credit as engendering a cultural change in attitudes towards work, and that is fine, but he will be aware that in some countries benefit conditionality is also being used to leverage non-employment related outcomes, such as health outcomes and child welfare outcomes. This happens in the US and Australia in particular. I understand that the Secretary of State has recently been on a trip down under. We see speculation in the press that Ministers are turning their minds to benefit sanctions, as the noble Lord, Lord Kirkwood, said on Tuesday, to address a range of other problems. Can we have some clarity on this today, and will the Minister confirm that there are no plans or intent to follow the Australian path and use conditionality for anything other than employment-related outcomes?

It would be extremely helpful when Ministers, including the Prime Minister, are discussing changes to conditionality that they do so in a measured way to avoid creating the impression that everyone on benefits is seeking to avoid work. In his speech to the Conservative Party conference, the Prime Minister said:

"For years you've been conned by governments. To keep the unemployment figures down, they've parked as many people as possible on the sick. Two and a half million, to be exact. Not officially unemployed, but claiming welfare, no questions asked".

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Nobody who has any knowledge of the benefits system could reasonably accept that as a fair representation of the situation in recent years. When we left Committee on Tuesday last week, there was a headline in the Evening Standard saying that people would have to travel for up to 90 minutes to take up work. Can the Minister say how conditionality is to be amended in this way? If everyone is to be better off in work, will this be before or after travel costs?

Of course, the universal credit is being developed in a period of rising unemployment. I do not propose to open the wider challenge to the Government on their growth strategy this afternoon, although we may drift into that, but we should use this opportunity to seek to understand how the "work first" approach of universal credit is being complemented by the work programme-the "black box approach", which I believe is entirely appropriate.

Perhaps the Minister would take this opportunity to update us on the programme, particularly as we understand that providers are being sworn to secrecy about how it is all going. In the interests of transparency, perhaps the Minister could tell us directly how many individuals have been referred to the work programme to date, clarifying which of the eight categories they fall into. Can he also tell us a little about how the WCA and the role of Atos Healthcare are feeding into all of this? We are aware of the improvements to the WCA and Professor Harrington's ongoing work. However, is it right that individuals are being referred to the work programme if the prognosis is that they will be fit for work in three months? Are we comfortable that the precision of "fit to work" within three months, six months or any other time period is within the competency of those making the assessment?

If this benefit is to work, it must work for all-this is very important. It must be free from stigma, and it must work in a fair yet firm way. I beg to move.

Baroness Wilkins: My Lords, I support the amendment, especially to say that it should benefit everybody. The simplification of benefits and plans to taper income to ensure disabled people who can work retain more of their income has been welcomed. However, there is very deep concern in the disability community that while some disabled people will gain under the universal credit, many will be made considerably worse off. In its current form, the Bill will dramatically increase disability poverty and leave many thousands of families lacking essential support.

At the moment, a disabled person receiving middle-rate disability living allowance who is found fit for work is eligible for the severe disability premium of £55 a week, whether they are working or not and if they live alone and do not have a carer. They may also be eligible in some circumstances for the disability premium of £29 per week as a single person and £41 per week for a couple, as well as the disability element of working tax credit, which is about £50 per week if they work for at least 16 hours per week. It is not unusual for someone to be eligible for middle-rate care, but to be found fit for work. For instance, it would apply to me because I can self-propel my manual wheelchair for

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50 metres. Similarly, someone who is severely visually impaired from birth is quite likely to receive middle-rate care, but be found fit for work.

However, under the universal credit, the gateway for extra support for disability will not be through DLA-or in future PIP-it will be through the work capability assessment conducted by Atos for the employment and support allowance. Under the universal credit system, unless a disabled person is put in the work-related activity group or the support group, they will get no more extra help than someone who is not disabled. These people are still disabled. They still face all the extra costs of disability not met by DLA; for instance, the need for extra help with housework, extra heating, extra laundry, help with the garden if they are lucky enough to have one. We also know that disabled people are more likely to have lower earning power and to be unable to work full-time. Let us face it, in the current economic climate, few employers are going to choose to employ disabled people over the non-disabled, and yet those people are going to lose any extra help because the universal credit will be based on the extremely flawed Atos assessment.

Noble Lords will no doubt have been inundated with e-mails and letters about this as I have, demonstrating that Atos is routinely failing to identify disabled people's needs. I am sure the Minister will remember from his visit last week to Hammersmith and Fulham Action on Disability a young woman with mental health difficulties. She had spent six years struggling to find help. She finally managed to get therapy about six months ago, and has been progressing well when she innocently attended her Atos assessment, not realising what she was up against. Atos found her fit for work. All her benefits were stopped as of last Friday and her mental state has been set back by months. She is now in debt for the first time and she is distraught.

I know the Minister is very concerned about disabled people's fears. As he said on Second Reading:

"The most disturbing thing that I heard today was the concerns of many noble Lords about the anxiety of disabled people". [Official Report, 13/09/11; col. 737.]

The noble Baronesses, Lady Murphy and Lady Gale, talked about how people were terrified or petrified, and that worries me more than anything I have heard. However, those fears are very justified unless this Bill is amended. I know we will come back to this many times during the course of the Committee, but will the Minister say what steps he is taking to ensure that disabled people's fears are met? Is he considering the proposals by the Disability Benefits Consortium, for instance, to retain the severe disability premium? Does he recognise that the universal credit risks oversimplifying needs by providing for only one disregard which ignores some disabled people's multiple levels of disadvantage? I hope he will reconsider.

2.15 pm

Baroness Campbell of Surbiton: My Lords, I would also like to support Lord MacKenzie's amendment and add something to this particular area. Can I ask the Minister to reflect on what happens when a disability assessment process, or an assessment process regarding a disabled person, is not properly developed and

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constructed in co-production with those who understand in detail what it is to live as a disabled person; that is, disabled people themselves? I know I am getting a bit of a reputation for banging on about involving disabled people in the issues that concern us. However, I understand from the disability charities and NGOs that I have consulted, as well as from the countless disabled individuals who have written to me over the past few months, that the universal credit assessment process, with particular reference to the work capability assessment process, is still deeply flawed due partly to disabled people's lack of involvement.

This morning, I telephoned the chief executive of the Royal Association for Disability Rights, Liz Sayce. Many of you will know her because recently she conducted the Government's disability employment support services review. She is very assiduous and capable. With a worrying example, she demonstrated where we are in danger of going wrong with one of the universal credit assessment processes, the work capability assessment. She told me about a woman who lives in the north-west and has end-stage multiple sclerosis. She can now move only one eyelid and murmur inaudible words. She was telephoned at home by Atos. They told her husband that she needed to attend a work capability assessment. When he explained that this was not possible, they said that they must speak to her on the telephone and read out a statement. When her husband explained that she could not speak, they asked him to hold the telephone so that they could read it out to her, so he put the speaker phone on. They said:

"This assessment is necessary and mandatory. If it does not go ahead, there will be consequences".

The woman, of course, found this very distressing and scary. They continued, refusing to take into consideration that the woman was not able to be interviewed. They were working from a script in which there is no flexibility and no requirement on assessors to apply themselves to real-life situations or to take a different approach to different disabilities or health conditions.

This example, and I know that there are others, shows that the Government must develop a different approach to the universal credit assessment process. I know Professor Harrington has attempted to make this happen in his work; I have met him myself. He listens and he is a good man. He tries to understand and this is reflected in some of his recommendations, but the whole process has not been intelligently and systematically co-produced in any substantive way with disabled people and disabled experts. We have done it. It was and is being done through the Government's Right to Control programme. Can we not do the same with this? The assessment process must not be driven by a script. It must allow for sensitivity and assessor judgment-personal judgment-as to when it is appropriate to change their behaviour and respond to a disabled person's condition and situation. Can the Minister assure us that a more co-productive and intelligent approach to all the assessment processes for universal credit will happen, and happen more effectively?

Baroness Hollis of Heigham: My Lords, I shall speak very briefly in support of my noble friend's amendment for two reasons. First, I was rather appalled by statements from the Prime Minister that the

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Government were for the first time tackling the issue of people who should be, but currently were not, in work. Really, that comes into the category of Boris-type statements, which are an imaginative reconstruction of events that did not occur. All parties-I am sure that I also speak for the Cross Benches on this-agree that we want to seek to help people into work, and we have been doing it.

When we came into Government in 1997, we had found that, particularly during the 1980s, thousands of people with some mild disability had been moved off unemployment benefit into what was then invalidity benefit, the precursor for incapacity benefit, in order to massage the unemployment figures. On behalf of the previous Government I took Bills to your Lordships' House that brought in proposals for the New Deal for all sorts of claimant groups. It was never a problem, as it had never been a problem of trying to help the unemployed into work. They are always anxious and keen to do so. The problem has always been those who, for too long, have been economically inactive and marginalised from the labour market.

It is for that reason that I and my noble friend Lord McKenzie continued to follow these policies when he came into the department: to ensure that new deals into work for disabled people, lone parents and for the over-50s were brought in to help people who for some time had been at some distance from the labour market. I am delighted that, insofar as the decent supportive activity of the previous Government may be pursued by the current Administration, we should welcome it. Some horror stories are now coming through about Atos, and we should be joining our disabled colleagues in protesting about that deforming of what should be a decent policy.

Secondly, my noble friend's amendment says that it is about supporting work for those who can provide security for those who cannot. I would like to spend a second to almost verbally amend it. Help into work those who can, provide security for those who cannot and support those who care; because those who care are left out of the equation. I do not doubt that the Minister's intentions are as decent as those of any Member around the table in the Committee. However, one of our concerns is that of the 6 million carers, about 400,000 to 500,000 receive carers allowance, which is a passported benefit from what is currently the disability living allowance based on hours worked and the level of care needed.

We are still awaiting what will happen to PIP and the number of disabled people currently on DLA who will receive the higher or lower element of PIP and whether the carers benefit will be passported from the higher rate or from both rates. Until that happens, not just disabled people, but thousands of carers are worried, anxious and distraught that they may lose the carer's benefit that they currently enjoy. I know that the Minister is engaged with this issue and I am not pretending it is a simple one, but I would be very grateful if he would, acknowledge first, the work done by the previous Administration in bringing those who are economically inactive back into the labour market, and secondly, that we all share a concern for the position of carers and if he could give us some idea as to when we will know what their situation is.

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Lord Wigley: My Lords, I will intervene briefly on this. I support very much the direction we are taking. However, I am not quite sure that I fully understand the words "to support work", as there is more than one interpretation of this. There is clearly the question of supporting people, particularly disabled people, in a way that makes it practicable for them to work. However, there is another question: that of supporting the availability of work. As we heard a moment ago, that is the challenge in many areas, particularly the old industrial areas. It is true in parts of Wales, northern England, Scotland and Northern Ireland, where there has historically been a greater labour reserve because people are encouraged not to be registered for work. Of course, there have also been the problems of industrial disease and accidents which have led to a large body of people who would need a considerable amount of support to be in work.

As it happens, many of those areas are the very areas where there is a lack of work opportunities. We heard a Minister going to Merthyr Tydfil a few months ago and telling people to get on their bikes. That will not actually solve the problem. We are talking of catchment areas with perhaps 30 or 40 people chasing every available job. Side by side with encouraging people and giving them the financial or other support that is necessary to enable them to work, therefore, there is the question of making jobs available within a reasonable distance for those people. If we do not do that, the whole thing becomes a rather superficial exercise. I do not quite see how the Government are going to match that up: in order for this legislation to deliver what they want, there must be those opportunities.

It strikes me that there are three factors that need to come together to provide job opportunities. The first is the employer. Secondly, there is the person looking for work, who may need help, particularly if he or she is disabled. Thirdly, there is the state. The circumstances of employers will vary considerably from area to area. In an area where there is lower unemployment, the employer may take on people and give a chance to people with disabilities or difficulties who might not be taken on elsewhere. Therefore, I put it to the Minister that this raises the question of whether the Government's policy is going to be uniform throughout all areas, or whether there will be a flexibility that enables the Government to give greater help to encourage employers to take on people in areas where there are high levels of unemployment, where they might not otherwise be inclined to do so if the potential employee has challenges that might influence, or be perceived to influence, the way in which he or she undertakes their work. In other words, a lot of questions arise in this context-perhaps not directly from the amendment, but from associated matters.

Lord Beecham: Does the noble Lord agree that one factor that might influence the situation is the question of travel-not in the sense that my noble friend Lady Hollis mentioned, but as a result of the impact of housing benefit changes? These might well lead to people moving away from where they are currently living, and where they might work, to much further afield, particularly in London. Would that be a consideration that needs to be taken into account?

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Lord Wigley: Yes. That was a point I made on our previous day in Committee: there will be an attack on labour mobility. That clearly is not the Government's intention, as their hope is that mobility can be encouraged. However, the interplay of housing benefit can have a direct bearing on that, and may undermine some of the objectives that they quite rightly have in mind. Practical questions like this have to come together with the safety net of social security provision provided by the state.

Lord Newton of Braintree: My Lords, I shall chip in briefly. First, I apologise that I was a little late and did not hear all the remarks of the noble Lord, Lord McKenzie. My lateness has something to do with the fact that I am myself a little bit disabled-in fact, I should probably declare an interest in the matter. That leads me to say that I hope it may be understood if occasionally I seek to intervene from a sedentary position in order to avoid the considerable effort of standing up.

I do not intend to follow the noble Baronesses-not because I do not have sympathy with what they are saying, but because I suspect that we shall have considerable opportunities to return to this matter in a more specific way later in the Bill. I do not agree with the remarks of the noble Baroness, Lady Hollis, about the Prime Minister-I had better make that clear, just to show that I am occasionally a loyalist-and I do not go along with her remarks about the Administration in which I was Secretary of State for Social Security. The notion that I was trying to encourage people on to invalidity benefit in order to massage the figures does not correspond with my recollection-or, I suspect, with that of the noble Lord, Lord Kirkwood. However, on the more positive side, I agree with the point about carers in general, which we need to bear in mind throughout these proceedings-although I would have taken it to be embraced by the second half of the noble Lord's amendment.

As for the amendment itself, I rather doubt that it is going anywhere, because there seems to be a division even on the opposition Front Bench about what its terms should be. It was being rewritten as we went along. It may be that the Minister will feel that its wording is not perfect. I hope that we will not be told that it is not necessary because that is what the Government are going to do anyway. If that is the case, they might as well please us by writing something in that says what they are trying to do.

2.30 pm

Baroness Hollis of Heigham: Just as a correction, there is no division on the opposition Front Bench. That is absurd. This is an addendum to a very well thought out amendment.

Lord Newton of Braintree: I rest my case.

Baroness Hollis of Heigham: So do I.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, Amendment 2 would define the purposes of universal credit as,

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In Tuesday's debate on Amendment 1, several noble Lords stressed the importance of language and risk. I am not sure that a definition that divides the caseload between people who can and cannot work is particularly helpful in that respect. However, it clearly is the purpose of universal credit to support people in or out of work, provide security and remove risk.

With regard to supporting people into work, I hope that it is already clear that work is at the centre of the new benefit. In designing universal credit our clear aim is to make work pay. In Tuesday's debate I referred to the significant improvements that we expect, overall, in terms of participation tax rates, marginal deduction rates and levels of worklessness. Key to this is the single taper, which will ensure that claimants see the benefit of every extra hour worked. We will debate the level of the taper in a later session. For now, I hope your Lordships will agree that the principle of replacing the current tangle of overlapping tapers is the right one and a major step forward.

Other key elements of the work focus of universal credit are the work-related requirements set out in the Bill, the work programme and support for childcare. I said on Tuesday that I hope soon-very soon, in fact-to be able to give more details about the childcare element of universal credit. This is clearly an essential part of supporting parents in work.

Baroness Hollis of Heigham: My Lords, if "soon" is around a week, is "very soon" around a day? An hour?

Lord Freud: "Soon", you can measure in weeks; "very soon", you can measure in days. Well, let us say that noble Lords in this Committee can.

To pick up the point made by the noble Lord, Lord McKenzie, on the application of conditionality; in the Bill conditionality is linked only to employment outcomes, but any responsible Government will always want to look at options for achieving other outcomes for individuals, taxpayers and society as a whole. Indeed, I remind the noble Lord that the previous Government tried sanctions as a way to improve compliance with community sentences.

On the related point of the noble Baroness, Lady Hollis, on IB and ESA numbers, I need to point out that the numbers were pretty much the same in 2008 and 1997. I welcome her focus on reducing inactivity. That is exactly the right thing. One can get pretty historical going over who is to blame or who is not to blame. This is the situation we are in and I do not think that any Peer in this Room would disagree with the proposition that we now have a benefits system that traps people in inactivity through its structure, and certainly one that does not apply substantial help to people to get out of that trap. She asked me to acknowledge the continuity between the two Governments, and I am pleased to do that. I can absolutely confirm that the design of the work programme, for instance, is very much based on the fact that the employment zones pilot initiated by the previous Government was clearly the most successful pilot. We picked that up, effectively, in the work programme and made it a national programme.

While the aim is clearly to help as many people into work as we can, universal credit will also provide for

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those who cannot work. We have ensured that it is specified in the Bill that a number of groups will receive unconditional support without having to meet any labour market requirements. This will include those assessed as having limited capability for work and work-related activity; claimants with regular and substantial caring responsibilities; and lone parents or nominated carers with a child under the age of one.

In terms of benefit payments, the structure of the benefit is similar to existing provision for people who are out of work. We have announced changes where we believe change is needed, and the Committee will be looking closely at specific points, such as disability support, housing benefit and the household benefit cap, when we reach the appropriate clauses.

It is important to be clear from the outset that universal credit is overwhelmingly not about taking money away from people who are out of work. That much is very clear from the impact assessment, which shows that the majority of losers are people in work, many of whom have higher earnings. As I said on Tuesday, I hope that an updated impact assessment will be available soon, but the fact is that most workless people are not losers and the overall impact of the reform is progressive.

I shall here refer to the important matter raised in particular by the noble Baronesses, Lady Campbell and Lady Wilkins, of the work capability assessment. We continue to work with Professor Harrington to ensure that that assessment works effectively. Clearly, he is involving disability groups in that development in a very proactive way. I obviously know the concerns of disability organisations in this area and I will aim to explain that in much more detail when we get to Clause 12, if that would be acceptable to noble Lords. It is also slightly misleading to talk about losers when we have a package of transitional protection to ensure that there are no cash losers as a direct result of the migration to universal credit, where circumstances remain the same. I understand that noble Lords are concerned that any claimants should be worse off under universal credit, but the fact is that we cannot simplify the system while retaining each and every element of all the existing benefits. That would be simply unaffordable.

If I can touch on the introduction of the PIP on carers, which was raised by the noble Baroness, Lady Hollis, and my noble friend Lord Newton-

Baroness Wilkins: Does the Minister not accept that some disabled people in work are going to be significant losers as a result of the universal credit? They will be deprived of what they currently get-the £55 a week severe disability premium. That is why the organisations are so concerned. While there may be transitional arrangements, what about the people who come after the transition? The transition is only for now.

Lord Freud: As we restructure the benefits, the out-of-work benefits remain essentially the same. We are making some changes to simplify those, which we will come to in some detail, but rather than taking one aspect I would like to deal with the whole of this at the right time and take it through. I take the point and I will go through it in great detail when we come to the

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adjustments in the structure of disability benefits. I think it will become a bit random if I just deal with that now. I hope the noble Baroness will forgive me. I am not dodging it; I just want to put it in the proper context.

I want to pick up the point about the entitlement for carers related to PIP and how that will work. Today, all I can say is that we are looking at this issue very carefully. Again, I propose to discuss this in great detail when we get to Clause 75. It is a most important issue in this legislation.

We cannot afford not to simplify, as there is clear evidence that complexity within the existing system is acting as a barrier to work. It is also, interestingly, a barrier to take-up-again the impact assessment shows the clear gains for thousands of individuals that we expect from increased take-up. The analysis of the existing impact assessment shows that two-thirds of the reduction in poverty that we are looking at is a result of take-up rather than the structure of the Bill. We are not expecting that effect to change significantly when we have the new impact assessment soon.

In our proposals for a simpler benefit we think we have got the balance right between promoting work and providing security. I understand that noble Lords may disagree with us on specific issues, but I hope they will accept that the overall purpose is not in doubt. On that basis I would urge the noble Lord, Lord McKenzie, and the noble Baroness, Lady Hayter, to withdraw their amendment.

2.45 pm

Lord McKenzie of Luton: I thank the Minister for that detailed reply. Of course I will be withdrawing the amendment. I thank all noble Lords who have spoken in favour of it and even the noble Lord, Lord Newton, for occasionally being a loyalist. It would be helpful if he did not do it too often on my amendments. We will return in some detail to a lot of the issues that the amendment touches on over the weeks, if not months, ahead. I also accept that the precise wording of the amendment could be subject to challenge. If someone wants to offer an alternative, I am happy with that. It is an attempt to put something in which is trying to be indicative of what the universal credit is about, with the focus not only on work but also on support for those who are not opposed to moving closer to the labour market and, as the noble Lord, Lord Wigley, pointed out, for those who are very keen to get back into the labour market, but for whom there are no jobs.

A common feature of many noble Lords who contributed to the debate is about the WCA and concerns over how it is being used in the universal credit for access to the disability additions. I also raise the point about how I understand that it is being used in relation to the work programme. If there are concerns about how Atos is making assessments on whether somebody is fit for work, in the work-related activity group or the support group and is struggling to do that on a basis that people find acceptable, then the added precision that apparently it is being asked to provide about whether that person is going to be fit for

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work in three months or six months, which drives how some of them will enter the work programme, seems to me another dimension to what it is being asked to do and therefore somewhat worrying.

When we had a briefing from officials, I asked whether any of the appeals that had taken place were around that prognosis rather than the designation that was temporarily being visited on somebody. I am not quite sure what the answer to that is. If the work programme is a key part of helping people into work, which we agree is the intention of universal credit, how Atos or the work capability assessment features in that is of some importance. The noble Baroness, Lady Campbell, raised the concern that the current assessment processes have not been co-produced. We share some of the thinking about how the WCA has been developed. It was introduced under our legislation. A lot of effort went into focusing on it, just like the effort that is going into the assessment of DLA and PIP. But when it came to the practice of it, it turned out to be quite different. I accept that it is an evolving situation, but one can understand the fear that has been expressed today and how it represents the views of disabled people more generally about how this is featuring and working in the universal credit.

The Minister did not respond to the questions around the work programme. Would he like to do that now and give us an update on how it is progressing? That is particularly important at this juncture. The previous programmes we have talked about-my noble friend Lady Hollis mentioned some of their origins-by and large were developed in an economically vibrant situation where unemployment was reducing. We are not in that environment now.

Lord Freud: I can tell noble Lords that, regrettably, at this stage it is very early days. The noble Lord will be aware that it was launched on 10 June. I do not have any meaningful data to supply him. I am not sure when I will have some, but when I do, I will let the Committee know.

Lord McKenzie of Luton: Might I ask the Minister to use his best endeavours to see that we get that data soon?

Lord Freud: My Lords, I think the answer to that is no.

Lord McKenzie of Luton: Perhaps I can press on one or two other matters. I was interested in the noble Lord's response about conditionality being associated with work-related activity. I accept the assurance that in respect of this Bill, that is what the focus is, but am I right in getting the hint that there may be some wider plans following this Bill where that conditionality might be applied more generally, not just in a work-related context? Perhaps the Minister would like to say something more about that.

Lord Freud: I have no information on any plans in that area at present. This Bill is about conditionality for employment purposes, and I have no information on any other such plans.

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Lord McKenzie of Luton: Perhaps the Minister will let us have some information as soon as it is available to him. We are going to return to many of these issues in our further deliberations on this Bill.

The issue of travel costs has been released. Perhaps the Minister might reflect on the assertion that people should now be prepared to routinely travel an hour and a half each way to take up possibly low-paid work and how that fits with someone being better off in work if the costs of that travel are not covered or dealt with in some way.

We also had a bit of an historical debate about what various Governments did. My noble friend Lady Hollis was very clear about what happened on our watch, and as I said, the Minister was involved in some of that. I accept the assertion of the noble Lord, Lord Newton, that under his watch he did not just sit there and let the number of people on incapacity benefit accumulate. On that basis we should be in agreement that the Prime Minister's statement was wholly misleading. It is a political point, and noble Lords may think it is a cheap political point, but it matters when the most senior politician in the land is happy to use language and examples that are simply not true. The impact of this is to stigmatise people on benefits, and we should be deeply worried about that.

Lord Freud: Let me just make it absolutely clear what the Prime Minister was saying in the slightly more technical language that we understand in this Committee. The Prime Minister was making the point that we had created a series of inactive benefits onto which people were put and then left without any route back into the workplace. That was a dereliction of duty by Government. Our understanding has now transformed. We know that work is part of the solution for people with disabilities, not part of the problem. A key thing that we are trying to do in this Bill is to integrate the work process for people, whether they have disabilities-whoever they are. That is what the Prime Minister was saying. We are making an enormous effort to get people back into the workforce, and we are spending a lot of money-up to £14,000-on the people who are hardest to help, many of whom will have a disability. Underneath the political rhetoric, I think all noble Lords would agree with that sentiment.

Baroness Turner of Camden: Was the Prime Minister not speaking in support of the continuation of Remploy?

Lord Freud: I think we had the discussion about Remploy yesterday, and I will not go on about it again today.

Lord McKenzie of Luton: My Lords, I would just remark that if that is what the Prime Minister was intending to say, his usual high command of the English language eluded him on that occasion. My noble friend Baroness Wilkins emphasised the fear that people have about this process and about the WCA. My noble friend Lady Hollis was quite right to refer to carers. In fact, my shorthand amendment was meant to encompass that and I entirely accept the point. I am increasingly concerned about the impact

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of this on young carers as well. The noble Lord, Lord Wigley, referred to support for work. He is right, it should not only be about supporting people linked to the labour market. It is a question of how we are going to increase growth and create jobs as well, which is a much wider debate.

My noble friend Lord Beecham made reference to the housing benefit changes and the impact that those will have on labour mobility. I think that the noble Lord referred to people not losing out from universal credit. When you look at the impact of universal credit and some other measures in the Bill, particularly the benefit cap and housing changes, I am not sure that that assertion would necessarily hold true. Having had a good start to proceedings today, we will revisit many of these issues.

The Earl of Listowel: I apologise for coming a little late to this debate, but there is an important point on which I would like some clarification. The Minister in his response said that we are trying to move from a complex system to a simpler one. That resonates with me, having listened to what Professor Eileen Munro has been trying to do with social work, where there was a very complex, bureaucratic system and they have tried to move to a more simple system. But they have discovered that the professional judgment of people at the front line becomes particularly important. The way they use their discretion becomes much more important, and listening to the noble Baronesses, Lady Wilkins and Lady Campbell, and the way in which some of these complex cases are being dealt with by people at the front line reminded me of what my noble friend Lady Meacher said about the importance of training people who work on the front line. It perhaps also reinforces the point I have made in the past about making the culture of the organisation in which people work sensitive to the needs of those who may be mentally ill or vulnerable, and who may respond very poorly to people who seem to be persecuting them in the way they are pursuing them. Have I understood that correctly or is the Minister referring to a different paradigm?

Lord McKenzie of Luton: I think we would all support the concept of a system that was simpler and more readily understood. It helps with take-up, which is the point that the Minister made; we accept that. As we go through the Bill we will examine in fact how simple we can make the system. People have complex and sometimes very chaotic lives. How easy it is to distil those issues into a very simple system and still maintain fairness is one of the challenges we face as we go through the Bill. I readily accept the need to provide full support for people, particularly those at the front line. In a sense, we have an interesting situation in which the work programme, the "black box" approach, gives a lot of discretion in that respect to those working at the front line, but at the same time we have a universal benefit which is more constrained and potentially more restricted. Having said all that, it is probably time to withdraw the amendment, at least for the moment.

Amendment 2 withdrawn.

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Amendment 3

Tabled by Lord Kirkwood of Kirkhope

3: Clause 1, page 1, line 7, after "payable" insert "after consultation with other United Kingdom legislatures"

Lord Kirkwood of Kirkhope: My Lords, having regard to the constructive and comprehensive debate we had in the first session of the Grand Committee, and because there is a very important amendment next in the name of the noble Baroness, Lady Hollis, which I wish to support, I beg leave of the Committee to withdraw this amendment.

Lord Foulkes of Cumnock: My Lords, I added my name to this amendment and intimated to the Clerks and to the previous Chairman that I wished to move this amendment. It is unfortunate that my noble and assiduous friend Lord Kirkwood-he is a friend-did not seek to move it. He has drafted it very well and I shall speak to it briefly because I know we have a very important amendment in the name of the noble Baroness, Lady Hollis, and, indeed, many other important amendments coming up. But this amendment allows us to discuss at an early stage the implications of devolution in relation to the Bill. It also gives me an opportunity to raise an issue about devolution that applies to other Bills as well. Indeed, a lot of what I am saying about this Bill applies to them.

Unfortunately, because of devolution, we have had less consideration of Scottish, Welsh and Northern Irish business here in the United Kingdom Parliament. That has had some unfortunate consequences in Scotland that are causing political difficulties for some of us. It has now gone too far because the United Kingdom is still responsible for about half the identifiable public expenditure in Scotland, including welfare benefits, and for about half the legislation affecting Scotland, including this Welfare Bill. Yet we seldom discuss the implications for the devolved authorities because they have different arrangements for dealing with certain things, and I want briefly to mention one or two of them.

3 pm

There is a mistaken view-I heard it from the noble Lord, Lord Butler, earlier today in a Question on the Floor of the House-that we effectively almost have independence for Scotland rather than devolution, and devolution is a very different thing. We are still the United Kingdom Parliament. We are ultimately responsible for everything that happens in the United Kingdom, and the devolved Parliaments are subsidiary Parliaments to this United Kingdom Parliament.

This legislation has a massive effect in Scotland, as well as in Wales and Northern Ireland, and it is often different because of the different regimes. It is right for us to give the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly their appropriate place in consideration of this matter. Yesterday, there was by fortuitous chance a debate on this Welfare Bill in the Chamber of the Scottish Parliament. I want to illustrate the effect that the Bill will have in Scotland, and there is no better way than quoting a speech made yesterday by my successor as a Lothian list MSP in the

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Scottish Parliament, Kezia Dugdale. She referred to a meeting that had taken place of the cross-party group dealing with welfare with Action for Children Scotland, One Parent Families Scotland and Children in Scotland. Of course, I accept that the majority of issues that they raised were similar to the ones raised by bodies in England or in the United Kingdom as a whole, but there were two peculiarly Scottish issues. Kezia Dugdale said:

"The Scottish Child Law centre also made an interesting point. It highlighted the possible impact of the reforms on the minute of agreement for separating couples, which is unique to Scotland".

I do not know whether the Minister or his officials-and he has a bevy of officials behind him, as always-have even thought about the impact on the minute of agreement for separating couples.

Kezia Dugdale said that the second specifically Scottish dimension is that,

They do not exist in Scotland. There are no Sure Start centres in Scotland, therefore the Scottish Government will have to come up with an alternative way of dealing with implementation. I do not know whether the Minister and his officials have thought about that or what discussion they have had with the Scottish Executive in relation to that.

Those are just two specific examples. I think that the Scottish Government need a bit of a stimulus to consider some of these implications. Again, I quote from Kezia Dugdale in the debate yesterday:

"In June, I lodged a parliamentary question to ask whether any work was being done to assess the impact of the changes on child maintenance. In her answer, Roseanna Cunningham said that no work had been done. I then wrote to her to ask whether she would model the impact on Scotland to decide what could be done to address it. She wrote back saying that she had no plans to model the impact of the changes.

What does that tell us? I suggest that it tells us that the Scottish Government is taking a very relaxed, perhaps even complacent, approach to the distinct areas that it has the power to address now. That view is shared by One Parent Families Scotland, which was, in its words 'very disappointed' with the response that Roseanna Cunningham gave me, which, naturally, I shared with it".

By consulting formally on a number of occasions and in a number of ways-of course, this amendment deals with a particular consultation at a particular time in a particular way, but I want to mention all the consultations that should take place right now-it might activate their interest and shake them out of their complacency so that they look at the peculiar implications in relation to Scotland.

Finally, yesterday my noble friend Lady Healy kindly gave me the submission from the Convention of Scottish Local Authorities-COSLA-which I had not seen. COSLA highlighted another impact which is different in Scotland. I quote from its submission:

"After 10 years of devolution the Scottish legislative framework and duties on Scotland's local authorities are very different to England. Scottish local authorities are working towards the 2012 statutory duty that all unintentionally homeless households will be offered settled accommodation. Direct payments, alongside

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other housing benefit changes, such as the extension of the shared room rate and under occupancy, may jeopardise councils' ability to meet the 2012 homelessness target".

Again, there is a difference in Scotland.

Consultation with the devolved authorities is essential not just in the context of the amendment drafted by my noble friend Lord Kirkwood, but in the context of every aspect of this Bill. I want to know from the Minister what consultation has already been undertaken with the authorities in Scotland, Wales and Northern Ireland and what consultation with them is planned. The amendment provides a peg to ask those questions, for us to discuss this issue and, I hope, for us to get some answers from the Minister. I beg to move.

Lord Wigley: My Lords, I hope I will not distress my noble friend Lord Foulkes unduly by supporting what he said. I preface my remarks by supposing that there will not have been the studies in the National Assembly in Cardiff that he was calling for in Edinburgh, but I will not castigate the Labour regime in Cardiff for not undertaking such studies. The point, however, is a material one. In the eight months that I have had the opportunity to speak in your Lordships' House, I have realised that in many Bills-I think of the Police Reform and Social Responsibility Bill, the Localism Bill and the Public Bodies Bill-there are implications for the devolved Administrations as a result of changes in legislation here that do not always become apparent on first appearance.

In the context of the knock-on effects of this Bill, there will most certainly be implications for the housing sector because most of the responsibility for housing rests with the National Assembly, but housing benefit does not, and there is going to be interplay. There will be an impact in the realm of carers. The initiatives taken in Wales have not been quite as radical as some of the ones taken in Scotland, but none the less there is a bearing if the state takes certain responsibilities in Scotland, Wales and Northern Ireland that are not undertaken in England with regard to the support that is given. There has to be at least an understanding of how those two factors may work.

With regard to the opportunity for work and training, again responsibility will lie with the devolved Administrations. There needs to be an approach across government to legislation that is going through Westminster in general to take on board the knock-on effects. There needs to be a systematic approach to co-ordinating them. It may well be that your Lordships' Chamber has a role to play in that.

The system of devolution that we have is unbalanced. I can well understand that that causes difficulties for those who are framing legislation in London when the interpretation and the interactions will be different from area to area. What has also become apparent to me is that in the context of matters that are totally non-devolved, there is still an implication for the National Assembly, and that in matters that are totally devolved, there is an implication here, from cross-border issues, from consequences of the Barnett formula and so on, where there is an interplay. Therefore in both areas one cannot just assume that there is a sealed border and there should not be a discussion.

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I would have hoped that, in raising the issue at this stage-and it could be raised at any stage going through this Bill-there will be the approach of thinking "is there going to be any direct bearing with regard to the legislatures in Scotland, Wales and Northern Ireland?" If so, these can then be built in and assurances given at the appropriate time that they will be taken on board. That would be helpful for the progress of the Committee.

Lord McKenzie of Luton: I thank my noble friend Lord Foulkes for picking up the baton from the noble Lord, Lord Kirkwood, so that we have the chance to have the explanation of the points that were put by my noble friend and by the noble Lord, Lord Wigley. Doubtless the Minister will be able to tell us what consultation and engagement has taken place, but I think that the request is that it is not simply done at some formal stage, perhaps when policy is being formulated, but that we consider it as an integral part of our consideration of this Bill. If we can get nothing other than that from this amendment it will have been worthwhile preserving it for our brief debate.

Lord Freud: My Lords, I will deal with Amendment 3, which is the one noble Lords have concentrated on. Amendment 3 would introduce a requirement to consult the devolved Administrations before the introduction of universal credit. I must point out that social security is a reserved matter in Great Britain but the implementation of universal credit will have an impact on some matters of policy which are devolved, for example, housing, skills provision and childcare. For that reason, we are working closely with the devolved Administrations on the implementation of measures in the Bill and will continue to do so to ensure that the introduction of universal credit goes smoothly.

We have been discussing aspects of the Bill since well before its introduction during the latter part of 2010. The Secretary of State and I have had a number of meetings with Ministers in the devolved Administrations. A formal role has also been established for the Scottish, Welsh and Northern Irish Governments and for the Scottish and Welsh local authority associations on the universal credit senior stakeholder board. We have a concordat between DWP and the Scottish Government that sets out the commitment on communication and consultation; indeed, the Secretary of State met Scottish Ministers most recently a fortnight ago. I therefore hope that noble Lords will be reassured with regard to the concerns they have expressed. We are addressing these issues, we are consulting thoroughly, and on that basis-

Lord Wigley: Before the Minister sits down-although he perhaps cannot give a reply now-would he consider at some stage during the passage of this Bill the possibility of introducing a new clause or subsection? This could perhaps come towards the end, where questions such as extent arise, and propose that there should be a duty on Ministers to consult not only with regard to the primary legislation, but with regard to the impact of the orders that will be coming from the primary legislation. If it is in the Bill, there will be no excuse for not consulting at the appropriate time.

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Lord Freud:Currently, my understanding is that there is not a formal duty, but I have a commitment, and I am informing the Committee that we have an intense consultation process and we will continue that. I think it is an entirely unnecessary, bureaucratic thing to change that. The Committee has my assurance that that process will continue with a great intensity, as it has up to now.

3.15 pm

Lord Foulkes of Cumnock: I do not know whether the Minister had intended to finish, but can I back up what my noble friend Lord Wigley said? I find his support in no way embarrassing, by the way. It is indicative of the fact that Members here, and outside, did not seem to be aware of the implications in relation to the separate matters affecting Scotland or of the consultation that has taken place. Reading the debate in the Scottish Parliament yesterday, it seems that Members of the Scottish Parliament were also not happy about the way in which consultation was taking place. Voluntary bodies did not seem to feel that some of the differences that affect Scotland-and no doubt that applies to Wales as well-were being taken account of. Therefore, would it not be better to have a specific duty for Ministers to consult? After all, this Government will not be there for ever. Maybe they might like to put some responsibility on to the next Labour Government to make sure that this consultation is undertaken. It would seem to me that the noble Lord, Lord Wigley, has a very good suggestion. If the Minister is keen to do it anyway, why would it create any problems if it was specifically included?

Lord Newton of Braintree: Having been restrained by my noble friend Lord Kirkwood from what would have been some inflammatory remarks at an earlier stage, can I ask two questions at this stage before my noble friend sits down? First, if we are to go down this path, can we also have an obligation imposed on the devolved Administrations to consult on legislation they pass that has a significant knock-on effect in England, of which we have just heard another example in the housing field? Secondly, and quite separately, could he say a word about Northern Ireland, which to my recollection did not accept UK legislation but passed the same thing through its own procedures? Is that going to be the future situation as well?

Lord Freud: Yes, my Lords. In Northern Ireland they have a system of what they call parity. In practice they pick up Great British legislation.

Lord Newton of Braintree: It is not an exempted issue but they do the same thing.

Lord Freud: They do the same thing. It is a different arrangement. I have gone to Northern Ireland particularly on this matter. I am anyway, as you might imagine, not in a position to offer duties of this or that either way. However, I would not want to go back and try to do it under any kind of pressure because we are talking about the implementation of a very complex set of changes. Having a bureaucratic to-and-fro process is exactly the wrong way to do it. The right way to do it is the way that we are doing it, which is in intense

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dialogue and working it through. If noble Lords are interested in practical implementation of complicated transformative changes to our social welfare, they should allow us to do it this way because that is the best way that it will be achieved to time, to budget and to the betterment of the people in all the countries that we are talking about. I beg the noble Lords to withdraw the amendment.

Lord Foulkes of Cumnock:My Lords, there seems to be some encouragement from the other side.

Lord Newton of Braintree: It was not intended to be.

Lord Foulkes of Cumnock:If the noble Lord, Lord Newton, had waited a minute, I was going to say there seems to be encouragement for me to withdraw this amendment, and I certainly intend to do so. I have great respect, particularly for the noble Lord, Lord Newton, who was a distinguished Secretary of State and who I remember with great affection from when we were both in the other place together. I also have a lot of respect for the noble Lord, Lord Freud, who I have got to know and have heard speak on this issue regularly in the House, if not in Committee. I accept his assurances with no reservations whatever on that.

I agree wholeheartedly with the point made by the noble Lord, Lord Newton. To take one random example, if there had been greater consultation by the Scottish Executive with the United Kingdom Government on free personal care, some of the problems that arose would have been obviated. However, I am genuinely concerned-and this is no criticism of the Minister-with something that applies across the board, even more in the House of Lords than in the House of Commons, because in the House of Commons there are MPs from Scotland, Wales and Northern Ireland who get up regularly to raise these issues. I get the impression sometimes that the House of Lords is very Anglo-centred, very south of England-centred, sometimes very London-centred, sometimes very north London-Camden-Islington-centred. It is useful from time to time to remind people who find it easy to come in here on the tube day by day and go home at night, and who live that kind of life, that there are some of us on the periphery who have a different kind of life with a different set of regimes. Legislation passed by this United Kingdom Parliament affects the whole of the United Kingdom, and sometimes some people need reminding. I withdraw the amendment.

Amendment 3 withdrawn.

Amendments 4 and 5 not moved.

Amendment 6

Moved by Lord McKenzie of Luton

6: Clause 1, page 1, line 8, leave out "awarded" and insert "paid"

Lord McKenzie of Luton:My Lords, I am not quite sure what was in the mind of the noble Lord, Lord Kirkwood, when he drafted the amendment. He may want to take the opportunity to enlighten us. But

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looking at the distinction between "awarded" and "paid", our attention was drawn in particular to Schedule 1, paragraph 6. This paragraph enables an award of universal credit to be paid in whole or in part by means of provision of a voucher. Perhaps the Minister could expand on the intention behind this paragraph, and on the circumstances in which it might apply. I am aware, of course, that there are existing programmes where vouchers are used: in health, for example, for specs and contact lenses and for the Healthy Start food initiative. I know that the Minister has turned his mind to vouchers in the past. I think it was in connection with the sanctions regime on an earlier piece of legislation we were debating. Does this provision herald a new approach, or does it simply look to replicate existing arrangements? If so, what are they? I beg to move.

Lord Freud: My Lords, regarding the reference to vouchers in paragraph 6 that the noble Lord, Lord McKenzie, picked up-very sharp-eyed, as I would expect-we are looking at an option of paying childcare through vouchers. It is similar to some of the ways currently used by employers. It allows the flexibility of a parallel system with the employer system. I have to tell noble Lords that it is not the approach we are expecting to use. It is very much an option, but as I intimated earlier, we will announce our childcare proposals very soon.

On the voucher system, we have used the term "award" here because it is widely used across social security legislation and therefore makes a link to other legislation that provides for claims, payments and appeals. Changing the word would remove those links and require major changes in legislation across the piece. For that reason I ask for the amendment to be withdrawn.

Lord McKenzie of Luton: My Lords, I am grateful to the Minister for that explanation. I have no particular problem with the term "award": it was just the passing reference to the use of vouchers. I took it from the Minister's reply that it is only in relation to childcare that this is to be developed, and that does not look as though it is the front runner. We will know that soon. The only plea I would make is that if we go down the path of vouchers, we should do so sensitively. The prospect of stigmatising people who access facilities by paying cash or providing a DWP voucher has significant ramifications. It appears from what the Minister says that we will not have to face that in practice. On that basis, I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Amendments 7 to 11 not moved.

Amendment 12

Moved by Baroness Hollis of Heigham

12: Clause 1, page 1, line 13, at end insert-

"( ) an amount for council tax,"

Baroness Hollis of Heigham: My Lords, I am grateful to the noble Lord, Lord Kirkwood, for his efforts to bring this on and for the support for a similar amendment which seeks to deal with the same issue from the noble Baroness, Lady Meacher.

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Council tax benefit is a social security benefit and in my view should be within universal credit. DCLG, in another turf war, disagrees and stays out. The effect of this will be very damaging. I remind your Lordships that council tax benefit is paid to 5.8 million people at a cost of £4.8 billion, the average benefit being about £16 a week. At the moment local authorities are reimbursed by the DWP for their actual expenditure. In other words, it is demand led: or, to be technical, it comes within annually managed expenditure headings.

In future, by going over to DCLG, local authorities will be awarded a fixed-rate grant to fund a local scheme which is also expected to carry a 10 per cent cut to their usual expenditure. Given that that will now come within the departmental expenditure limit, the level each and every year will have to be negotiated with the Financial Secretary to the Treasury. It will not be demand led. Before the Minister says-I do not know whether he will-that local authorities are in a position to top this up, I am sure that he will be aware of the situation that local authorities find themselves in, which we can perhaps go into later.

In August the DCLG sent out a consultation paper, Localising Support for Council Tax in England. This consultation closes on 14 October. DCLG proposes to localise council tax benefit. Every local authority and every shire district within every county will have its own scheme. If that is not administratively complex enough, they will be required to make 10 per cent cuts in it.

On whom will the cuts fall? Pensioners-we are not sure yet whether it will be the over-60s or the over-65s-are 42 per cent of the recipients and will be protected. So the 10 per cent cuts rise to 20 per cent for everybody else. Thereafter, protecting other vulnerable groups is discretionary. If the local authority protects disabled people and families with children as well-a further 25 per cent of the client group-cuts of 40 per cent will fall on the rest. Finally, if a local authority went further and sought to protect those on 100 per cent council benefit, on IS or on JSA, cuts of 10 per cent would fall on the residual 9 per cent: the working poor, the working population. My Lords, do the maths. They will get no CTB whatever. If that does not impede the move into work, I do not know what does. So low-income families, encouraged into low-paid work by universal credit, which I strongly support, will find that the cuts from HB, which we will come to, and these huge cuts, given the protected groups in CTB, may wipe out any gain from work. What is the point of universal credit if it does not do what it says on the tin and make it worth working? Is this cut in CTB necessary? Why is it fine for DCLG to find £800 million to freeze council tax for all of us around this table today, while cutting £490 million from the poorest, who depend on council tax benefit? I think that it is disgraceful.

3.30 pm

As for the consultation, if noble Lords have a chance to look at it, I think that, like me, they will find it particularly interesting. I have never seen one like it. It is some 40 pages long, with bits front and back. Only one page, page 10, offers five principles-well, at any rate, five claims-for localising CTB. The other 39 pages are spent trying to overcome the difficulties

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that will result. I can only think that this was a civil servant's revenge. To put it another way, the Government's own document has one page in favour and 39 pages against. As I said-interesting.

I will deal with the five points in favour, which take up one page. First, they exclude pensioners-a protected group, they say-as they could not be expected,

Such a rule, they say, will encourage other claimants to work harder. On those grounds, of course, we should remove all benefits entirely from all people. It is absurd.

The second point of principle-allegedly-is that it will allow local authorities to simplify their administration. Wrong. Complexity will come as each shire district will have its own scheme, even though 80 per cent of the precept, for example, may come from the shire county. The claim is fallacious.

Point three is that it will increase local control over council tax. First of all, it will not. Because there is a fixed-rate grant, councils will be entirely dependent on either a factory opening-good, because that will reduce CTB demands-or closing, as is more likely at the moment, which will be bad, because it will increase demand for CTB, out of a fixed-rate grant. Or they will be dependent on demography, because an increased number of pensioners, who are a protected group, will increase the burden on everyone else.

The fourth principle is that it will allow councils to control their budget, and-the document states naively-to contribute a further £500 million to deficit reduction. Adding to the 30 per cent cuts already facing local authorities, it argues, is an increase in local autonomy. This is sophistry, my Lords. In the case of cuts, we apparently have local autonomy to make them and be blamed for them. In the case of increased funding, we can count on central government telling us how it should be spent.

Finally, the fifth principle is a reiteration that this,

and thus will support the universal credit. It is worse than that: it encourages local authorities to cut council tax benefit even further than necessary, because the council is allowed to keep any surplus. This, says DCLG, will ensure that councils will support the universal credit by getting more people into work.

Of its five claims-I cannot really call them principles-on one page of a 40-page document, the first is absurd, the second is fallacious, the third is false, the fourth is sophistry and the fifth is cruel. That is before we get to the 39 pages of problems that the DCLG itself identifies. As the officials appreciate the speciousness of all this, they then take 39 pages, as I say, to overcome the alleged difficulties. The first of these-and I would be surprised if the DCLG is not worried by these difficulties, because I am-is the problem of running two separate tapers, one for universal credit and one for CTB, each possibly different in each district authority, which could produce such high and overlapping reduction rates as to sabotage universal credit. The Government say honestly that they do not

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know what to do about this, so they have invited views. That is great. I hope they have asked the DWP what it thinks.

A second associated problem identified by DCLG is that each local authority may have different rules for capital, income, family size, taper rates and benefit run-ons. Realising that this produces 300 to 400 different schemes across the country, DCLG proposes to reinvent the wheel by asking local authorities, which now have this localised system in place, to collaborate with each other in joint schemes that are no longer local. In other words, DCLG, having destroyed a mandatory joint national scheme, having balkanised it, is now pleading with local authorities to invent voluntary joint schemes to avoid confusion, disincentives for people to move and the additional admin costs, as though it is politically feasible to expect voluntary joint schemes between Labour and Conservative authorities or between urban and rural authorities, because the better-off CTB authorities will up their gains and cut their council tax while deprived cities or coastal districts with a high number of pensioners will find that they can no longer put up the battered shield for their most deprived citizens.

My city-Norwich-recently attended a conference in Peterborough for the east of England precisely to see whether such collaboration was possible. It found little consensus for a common policy. I understand that Wales may go for a common CTB structure. England certainly will not. There is also a contradiction in terms. DCLG cannot pray localism in aid to argue that each district council needs its own distinctive scheme because it knows best and then ask them to forego that distinctiveness and join regional schemes to save costs, which will obliterate that very distinctiveness that DCLG has announced as its prize.

The consultation paper then turns to risk. With a fixed-rate grant, many small schemes will be highly vulnerable to a sudden factory closure or demographic change. If one district faced a Corus closure, for example, what should it do? The Government suggest that the other adjacent local authorities might voluntarily help out. My Lords, as if. Having smashed the national scheme that pooled such risk, DCLG suggests hopefully that local authorities might like to pool risk among themselves voluntarily. That is absurd.

The Government then belatedly recognise the real difficulty for those claimants who move between authorities as they seek work and the possible deterrent effect of different CTB rates-this is on page 28. Again, DCLG asks local authorities to be consistent with each other to overcome the balkanisation urged in the five principles in the first place. Appeals will remain national-even though every CAB in the country will be trying to help claimants through a balkanised, localised process-and so will the investigation of fraud. How investigators are likely to know, when there are no national rules but 300 or 400 separate schemes, baffles me, and I am certain it will baffle them. The balkanisation of CTB carries so many difficulties that DCLG is reduced to begging local authorities to submerge their localism in countrywide, regionwide or nationwide schemes to overcome the very difficulties that DCLG has put them under. As

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my own local authority said, the whole proposal is fraught with risk and will be extremely difficult to administer.

I have never seen a consultation paper like this in 20 years in local government and in your Lordships' House. UC, which I strongly support, was designed to increase the reward and reduce the risk of working, in ways that are clear, simple and rational for each family and fair between families, so that two families in similar circumstances, wherever they live, have the same financial support. Balkanisation does exactly the opposite. It is no accident that five of the worst affected boroughs-Hackney, Newham, Liverpool, Islington and Moseley-are among the 10 most deprived in the country. Bull's-eye, Mr Pickles.

This introduces a double lottery: a lottery for the local authority, which is at the mercy of a factory opening or closing for its CTB bill; and a lottery for individuals because what they get will depend not on their own circumstances, as with the demand-led national scheme under DWP, but on the circumstances of everyone else who lives in their locality. If they live with a lot of other deprived people, they may get less; if their area is affluent, they may get more. If their local authority has lots of pensioners receiving CTB, they will get less; a few may over the years get more. If their local authority decently seeks to protect additional vulnerable groups, those remaining, usually low-paid workers, will pay more. If it does not, the most vulnerable, including disabled people and families with children on 100 per cent benefit, will face additional cuts to their already fragile finances. Individual is set against individual; family is set against family; lobby group is set against lobby group: Mencap, if you like, is set against CPAG. It is an unpleasant, unnecessary and ugly scenario.

CTB has increased by 10 per cent this year due to the recession. Crucially, benefits have always been demand-led. To talk in technical language, they are under AME rather than DEL. If you wish to change the conditions, you do it by generalised changes to eligibility. No longer. The cake will be cut, allocated and carved up with each person's CTB depending on how many other people in the locality are claiming CTB as well. Think about extending the same principle to JSA, so that whenever the factory closes and the claimant count goes up, individual JSA benefit would fall-and then say, as DCLG does, with breathtaking hypocrisy, that this level will support you because people on JSA will now be encouraged to seek work. That is what this does to CTB. Hence, I believe that CTB is not safe in the hands of DCLG. It will utterly destabilise universal credit. I am asking that it be brought within universal credit and therefore within DWP so that there will be a nationwide, predictable benefit taper that does what it says on the tin-rewards work and reduces risks-rather than undermining both, as this document does. Otherwise, why bother with this Bill? I beg to move.

Lord Kirkwood of Kirkhope: My Lords, I share the credit for Amendment 13 with my noble friend Lady Meacher. We always expect forensic analysis from the noble Baroness, Lady Hollis, and she has excelled herself this afternoon. I will take a slightly different

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approach because I do not think that there is anything much to add to the critique. I cannot understand where this came from. We are talking about single working-age benefits. To my certain knowledge, for 10 years, it has always been expected that any change of this kind would embrace council tax benefit. For me-I am in favour of universal credit-this is not a constructive step to take because, as the noble Baroness has just said, it diminishes the effectiveness of universal credit. It goes in the opposite direction-not to mention the fact that it will inevitably cost local authorities more, and not to mention the confusion and conflicts on tapers and capital limits.

3.45 pm

My main question is: who is asking for this? It does not seem to me to be local authorities, certainly not in Scotland. There is a very strong briefing from COSLA stating that it would much prefer to stay with the current set-up within universal credit. Where is the evidence that this is going to help anything? What is the impact assessment of the costs? There is a whole raft of things that local authority colleagues will have to face in the midst of a period of substantial change. It is the last thing that they need. So my plea is: will the Minister help me understand where this proposal came from, who it is designed to advantage and what it will cost in the fullness of time? If he will help me with that, I will be very grateful. This is a serious subject for the Grand Committee. We will come back to it when we debate Clause 24, so we have a bit of time, although as I said earlier, I want to concentrate on the big issues. This is a big issue: it certainly is for me and I hope that it will be for other noble Lords. I hope that we can get an understanding of the politics of this.

Another thing is that the better-off calculation is going to be much harder to work out in each local authority area. How will that help claimants? I see no advantage in the Government's suggestion, other than their claim that local people in the big society will all get together and it will all be fine. I say to the Minister that, if it was me, I would be resisting this tooth and nail, because it may diminish his very important work, which the rest of the Committee are well prepared to support him on. This just seems to be taking a step in completely the wrong direction.

Baroness Meacher: My Lords, it is difficult to follow the fantastic contributions of the noble Baroness, Lady Hollis, and the noble Lord, Lord Kirkwood. Most of the points have been made, but there are a few things that I want to add. I have a cynical mind because I fear that the real rationale behind this proposal is to somehow split council tax benefit away from housing benefit because this is one of the proposals which will open a gap between the costs faced by the individual or householder and the benefit payable. If you add that gap to the housing benefit or housing allowances gap, it becomes very embarrassing because there is no way that people on JSA or reduced levels of ESA and all the rest of it as time goes on will be able to cover their costs. That perhaps makes it easier for the Government-I know this sounds cynical and a bit unreasonable, but I fear that it is true-to devolve some of that responsibility on local authorities rather

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than have the lot at government level. That is the only possible rationale I can think of for demolishing one of the great pluses of this whole reform-the 65 per cent take-up.

What we are going to see, undoubtedly, is a growing level of debt across the land. Council tax debt is already the largest type of debt dealt with by citizens advice bureaux. There were 170,000 cases last year, before we even start on this new reform, and the level will surely soar. That is one of my big concerns and the Minister will not be surprised that I mention it. Of course, the big group most likely to be in debt is people with learning difficulties and mental health problems. I can envisage many of these people coming to our door in need of in-patient care because they will be under such stress that they cannot deal with it. They will have bailiffs at their door and they will not be able to handle it. The CAB cites the example of someone with mental health problems coming along with a £518 bill in debt for council tax and a £183 bailiff charge. I would be very distressed in that situation and, clearly, our particular group cannot cope.

That is one of my issues. Another one is the work incentive, which I understand, respect and support, but you have to have a situation where the people who are given that incentive can actually work. The state has a special responsibility for those groups who, however much they may want to work, will find it extremely difficult to find an employer to take them on. All the talk about the importance of incentives to work, which we all subscribe to, has to be balanced by that recognition. The state cannot just abandon responsibility for people who simply will not be able to get into work; they will be on JSA because they will have been excluded from disability benefits. They will then have these gaps opening up and they will have incredibly little money to live on.

My last point is a question for the Minister. What will it cost local authorities to set up these administrative systems to run council tax benefits? How much of the apparent saving of £490 million will be lost in the cost of the administration of all these systems, plus the costs of bailiffs, debt collection and so on? I would be interested to hear the Minister's response.

Lord Williamson of Horton: My Lords, I support the amendment proposed by the noble Baroness, Lady Hollis-not perhaps with quite the same vehemence, but I definitely support it. In fact, I am getting into the habit of supporting the noble Baroness; that may not continue, but for the moment it seems to be well established on my part.

Those of us who strongly support the introduction of the universal credit recognise that the clause we are discussing is the most important one of the whole operation. That is because there can be nothing more important than deciding and making clear what it is by reference to which the award is to be calculated. This is the part of the Bill that says what the award is to be calculated by reference to. At the moment, the current text is "housing". That is open to quite a bit of discussion and dispute until we are absolutely clear about what is going to happen on council tax.

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This is the clause in the Bill that beneficiaries may actually read; they will want to know how their award is calculated, and council tax is an essential element. If they are told, as appears to be the case, that the level of benefit and the calculation of council tax is to be based on everyone else in their locality, whether they are pensioners, disability sufferers and so on, that will give rise to quite a lot of concern about the complexity of the arrangements that are apparently being proposed. I am concerned about that.

Those like me who have a child with a disability know that it is extremely important that, as far as possible, we should find some form of independent living for them. It is extremely important on the social plane. These people are considerably affected by how the universal credit is going to relate to housing and council tax costs. The standard rate will not prove so difficult, but this element of housing and council tax will be controversial. They will feel worried about it-I think that some are worrying about it already-and that is liable to reflect on the universal credit, which I strongly support.

I hope that the Minister will look favourably at the battery of comments on the issue of council tax which, if we follow what is set out in the consultation paper, seems to be complicated to an amazing degree. That is why I support the clarity of the amendment brought forward by the noble Baroness, Lady Hollis.

The Deputy Chairman of Committees (Lord Colwyn): My Lords, I wonder if we could hear from the noble Lord, Lord Newton, who is feeling invisible and has asked to speak from a sitting position.

Lord Newton of Braintree: My Lords, I have said that I will stand up if I can, but it is easier for me to sit down. I wanted everyone else to speak first in order not to frighten the Government Whip, but we are one short of a full house and I want to make it clear that this is indeed a full house, as it were, regarding worries about this issue. I had some rather less coherent concerns when I first read that this was to be excluded. Maybe the Minister has some wonderful answers that I cannot predict; I am just glad that I am not in his position. I think that we have had a devastating critique of this proposal, and I will take some persuading that it makes any sense. I chair a mental health trust and should declare that interest. I have some affinity with the noble Baroness, Lady Meacher, over her concerns on that front, but that is not what I want to spend my time on, nor do I want to repeat points. I have some questions, though.

If this is to be based on the allocation of a capped sum to every local authority, someone is going to have to devise a formula for the division of that sum. I look to the noble Lord, Lord Beecham, because of his local authority experience, and there are other noble Lords with similar experiences. Devising a formula for allocations between local authorities is the nearest thing to a magic art that anyone has ever devised. I once had ministerial responsibility for one aspect of it, and the fact is that I understood what my officials were telling me about this formula only for three minutes after they had explained it to me. In any event, there were

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said to be only two people in the country who actually understood it. Are we going to have to have another of those formulae, and what will that cost?

We are being told, if I hear the noble Baroness aright and the Minister does not have an answer, that every local authority in the country is going to have to invent its own social security system. That is what we are talking about. Unless they get together in Essex or wherever it may be, then Braintree will have its own social security system, as will Chelmsford and Norwich. How much is that going to cost? "Is it sane?", I ask, and hope for an answer. We are also told that in a world in which the existence of separate tapers has been one of the problems, and the aim is to get a consistent single-taper approach, we are now leaving a second alongside the main one. I can hardly believe my ears.

There is a practical question relating to the allocations point. Someone referred to factory closures. I had a lot of them in Braintree in the early 1980s. Courtaulds was one of the biggest local employers in the textile industry. It did me a lot of political damage but, leaving that aside, obviously it sent up the number of people on benefits, including whatever council tax benefit was in those days. The same thing will probably happen up in Fylde due to British Aerospace's intention to close its factories. However, there may be places where great new factories are being built. Is this going to bring windfall benefits? If there is a factory closure, everyone else in the area on council tax benefit has to have their benefit cut to pay for the new arrivals on to the benefit. If a factory opens or Tesco takes on 400 people, either the council or every council tax benefit beneficiary gets a bonus. These questions need thinking through and need answers.

Lastly, there is the question of appeals. If I hear the noble Baroness right, they are going to remain national. Who do the complainants go to? Is it the social security chapter of the Tribunals Service, which I know something about? If so, the judges of the Tribunals Service will need to be tutored on and informed about hundreds of different benefit systems and they will not be able to deploy their tribunal judiciary in the way they would at the moment. You will not be able to send someone who knows about Suffolk-you will not even be able to send someone who knows about Ipswich-to Norwich, let alone to somewhere distant or to London. At the moment, the aim is to deploy these judges with efficiency, bearing in mind that we are talking about the national systems that they know. Have these questions been addressed in the department? Have they been answered? Can the Minister answer them today? I live in hope.

4 pm

Lord Beecham: My Lords, my noble friend Lady Hollis and I go back a long way politically in local government terms, and throughout that long acquaintance I have always been impressed, as noble Lords have been since she came to this place, with the forensic mastery of figures that she has displayed today. She has produced a devastating analysis of the proposals and their impact in relation to council tax benefit. I have a reservation about the proposal she makes which I shall come to in due course, but fundamentally the

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problem is occasioned by the shift from, oddly enough in an era of universal tax credit-most of us wish to see it working and can see the logic of its applicability in general terms-to what will be a multifaceted and locally specific council tax benefit, one of the most significant benefits that are available. The noble Lord, Lord Kirkwood, asked where this has come from. In the bicentenary of Dickens's birth, the answer is fairly obvious: it comes from 19th century poor laws with differential rates being determined locally, in those days by the squirearchy and nowadays by local councils, a burden that most local councils would not particularly wish to adopt.

The impact will be very significant. The Local Government Association-I declare my interest as an honorary vice president, in the presence of the noble Lord, Lord Best, who is the president-has to my mind rather supinely accepted the underlying philosophy of the Government in deciding that council tax rates should be determined locally. I rather regret that, but the association at least points out some of the absurdities that stem from the actual implications of the proposal. Its analysis suggests that 80 per cent of local council tax benefit is paid to people receiving 100 per cent relief; that is, it is given to the poorest in our society, while some 35 per cent is paid to pensioners. If you take those two groups together as being likely to receive protection-pensioners will be protected under the Government's proposals, and presumably there is a strong argument for extending it to people on 100 per cent benefit-the entire burden of the £500 million cut will fall on the rest. Apparently it means that 1.3 million claimants will share a loss of £500 million a year, which is an average of £330 each. That is a formidable figure. Of course it would be less if you did not protect people on 100 per cent benefits, but by the same token those people would be paying a higher proportion. There is a huge problem in terms of the impact of all this.

There is also a potential problem with take-up. Even council tax benefit, although it reaches a significant number of people, fails to reach everyone who is entitled to it. Some £1.8 billion a year in council tax benefit goes unclaimed. Incidentally, and for the record, that figure is about 50 per cent more than is lost to the Treasury through fraud, not that anybody is for a moment defending fraud. It must be dealt with, but let us get these things in perspective: more money is unclaimed in council tax benefit than is lost through fraud by a minority of claimants.

What would be the impact of a new system of the kind that we have heard about? The likelihood is that that benefit would be claimed less than hitherto and the amount unclaimed may well go up. That is one area of concern in my noble friend's proposal, and it is a point made by the Local Government Association. Instead of receiving a council tax demand which is already rebated, people entitled to the benefit will simply receive a sum with which to pay their council tax at the ordinary rate-the universal rate in that particular locality. There is a significant risk that arrears problems will mount up substantially. Actually, council tax collection under the present system is pretty good in most if not all local authorities. I heard last night that the figure for collection in my own

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authority is 97.3 per cent, which is pretty high for any tax collection. There is a risk that that will fall, which will compound problems for local authorities.

There is a concern about the proposition that in future council tax benefits would come in the form of a payment effectively made directly to the claimant, who then pays the local authority. Similar issues have arisen over housing benefit and whether it should be paid directly to tenants or landlords. These are somewhat difficult areas and possibly-I put it no higher than that-need to be considered in a different way from benefits that do not relate to a specific payment which has to be made.

Another problem with the Government's proposal is that there does not seem to be much incentive for local authorities to promote take-up of the claim. They have a fixed amount to distribute and I suspect that it is not of any great significance to them who takes it up. In particular, what if demand is greater than the amount the Government allocate? A perfectly legitimate question was asked by the noble Lord, Lord Newton, with whom I also go back a long way: how is the formula to be calculated? If there is a shortfall, I would suggest that councils will not be particularly incentivised, especially in the present circumstances, to pursue the interests of those who are not claiming; there would be no extra money to pay for that. This all makes the whole scheme extremely problematic.

I turn finally to one other matter that goes beyond this clause, but in a sense relates to the take-up issue. In delivering benefits of this kind, local authorities have on the whole a pretty good record-although, as I have indicated, not one that is 100 per cent successful. However, they are experienced in dealing with claimants. There is a front-line system with a telephone line in almost all places, and often face-to-face contact so that people can be helped directly and conveniently with their problems. I repeat that all your Lordships support the principle of universal credit, but one problem is how in fact it is to be delivered. There is an assumption that everybody is online and it can all be done remotely. Frankly, that is an optimistic view. The possibility of delivering universal credit, whether or not it includes council tax benefit, through local authorities rather than the DWP or by some remote system should be experimented with. Leeds City Council has developed a good working relationship with the department in terms of delivering not only local authority benefits, but other benefits as well. I suggest that it might be worth the Government at least considering piloting the delivery of universal credit, in whatever form it finally emerges, through a number of local authorities to see whether that is more effective than simply relying on the current structures of the department and its agencies.

We all wish to see those who are entitled to benefits receiving them. There is a real concern among advice agencies, voluntary groups and so on, particularly if council tax is shifted in this way, that the face-to-face, convenient approach may be lost, and with it benefits might also go adrift. I hope the Government will look at that in the broad context of their proposals alongside its particular relevance to council tax benefit.

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Baroness Turner of Camden:My Lords, I hesitate to intervene in what seems to me a very complex and quite difficult discussion, but are we talking about a discount or a benefit? I remember some time ago I was approached by a number of organisations that told me that people were not applying for something called a council tax benefit because they did not want to look as if they were appealing for a benefit. I therefore tabled an amendment to the legislation at the time not to call it benefit at all, but instead to call it discount. Discount suits the description rather well. I myself get a discount from the council, not a benefit, because I am a widow and I live on my own. I do not call it a benefit. When we discussed this and I got acceptance for the idea to call it a discount, the organisations concerned were very pleased because they thought that a number of veterans who did not apply for the benefit would now apply for the discount. Whether or not that happened I do not know, but that is what we went ahead with. I think there is a difference between a benefit and a discount. Which are we talking about here?

Lord German: My Lords, I would support this amendment regardless of whether it was related to a cash change in Government. It is the policy issue that is most important here. I favour a national scheme, locally delivered, and I worry very greatly about the proposals before us for reasons which I will outline. Largely, the Bill will not be able to meet the principles on which it is set. I have one disagreement with the noble Baroness, Lady Hollis: I found that all four principles-not five in my copy-in Paragraph 5.2 can be criticised equally, because they cannot be delivered through a national scheme.

Earlier this afternoon we heard a passionate plea from the noble Lord, Lord Foulkes, about the need concentrate on the United Kingdom. In his reply, the Minister talked about our benefits structure being a system reserved to the United Kingdom. I want to point out to noble Lords that we try to be consistent in what we do in Government. We ought to recognise that the Scotland Bill is proceeding through Parliament at present. The origin of that Scotland Bill was a commission chaired by Sir Kenneth Calman which looked at which aspects of our society make it worth having a United Kingdom and at what holds the United Kingdom together. Apart from foreign affairs and defence, the one key thing which he said was holding this country together was our social security system. As a reflection on what we have heard this afternoon, I ask why it is that we want to damage that system of reserved powers which works for the United Kingdom as a whole. We have heard how it works in Northern Ireland, but it works in the same way and with the same outcome, so it is therefore a United Kingdom system.

We are going to take £5.8 billion, whether it is cash-reduced or not, out of this system for the United Kingdom, and put it into a system which, quite frankly, will not work according to the principles laid out in the document which is being pursued by DCLG. I am reading from paragraph 5.2, just so we can get some consistency; we may be on a different page, but I am on page 13. It says, "We therefore propose," that is, the DCLG,

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Local authorities to have a duty to run a scheme to provide support for council tax in their area".

This Parliament and this Government can deliver that in England, nowhere else. It then says:

"For pensioners there should be no change in the current level of awards, as a result of this reform".

This Parliament and this Government can deliver that only in England, not in the rest of the United Kingdom. It says further:

"Local authorities should also consider ensuring support for other vulnerable groups".

This Parliament and this Government can deliver that for England alone, not the United Kingdom. Finally, it says:

"Local schemes should support work incentives, and in particular avoid disincentives to move into work".

This Parliament and this Government can make sure that that works in England alone. Therefore, the principle upon which I believe the United Kingdom is based is being breached by this Bill and the change that we have before us.

4.15 pm

Of course, there are the premier arguments which we have heard from the noble Baroness, Lady Hollis, this afternoon. Essentially, if you believe in a universal credit, and you have a postcode lottery for what that amount of money might mean to you, how on earth are you going to be able to judge whether or not work is beneficial for you? Council tax benefit-or discount, or whatever terminology you want to use-is a part of the sum of money you will have to support you alongside the universal credit. This means you would have to take that judgment, and you would have to know about what would happen locally.

This is along with all the other complaints that we have seen for this principle across various different areas. Of course we are talking about different areas in England. Who knows what would happen? Given the legislative competence in place in all three parts of the United Kingdom, Scotland, Wales and Northern Ireland, all the powers over local government are with those administrations. They are not with this Parliament. So you cannot say "it should be local government", and you cannot put any ring-fence around it. All you can do is hand over a chunk of money. I have worked this out, and it is about £1 billion. So we are going to hand over £1 billion, and who knows what those Administrations might do with it? You cannot say it would be used for reducing council tax for people. What you can do, of course, is come to some form of accommodation, or concordat, or agreement; but is that what we want from a system of universal social security? I do not think it is.

In this document from the DCLG, it says that the DCLG,

It also says that,

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The Government may expect this, but they cannot guarantee it. That is what I mean about guarantees. This is a guarantee that we give across the whole of the United Kingdom. In my view it is important that we have a national scheme; no matter what funding is within it, given the problems we have, certainly we must have a national scheme, available across the United Kingdom.

We have been promised an impact assessment on this proposal. We were told in the other place last November that the impact assessment would be appearing when legislation appears. Since the consultation for England only completes next week, it is unlikely we will see legislation before this Committee stage is completed, and therefore we are not likely to have an impact assessment. Therefore, I ask the Minister, would he be prepared to ensure that the impact assessment of the Government's proposals on the abolition of council tax benefit is before this Parliament, and before us, in consideration of this Bill?

The only legislation that can ensure that the principles of a scheme-those that I have read out-are universal will be this Bill, not any Bill produced from DCLG. It is surely our responsibility to ensure that we deal with these issues in this Bill. There is no other place for it to happen. So it is important that we have the information before us on which we can make that judgment. If council tax benefit falls out of universal credit now, it will be gone for ever, because we have given the power away-and you know that once you give power away you cannot get it back again.

I also believe that there is a problem for England. The problem that England will have is trying to collaborate. The noble Lord, Lord Beecham, did not own up to a wonderful review that he wrote for the National Assembly for Wales in which he promoted collaboration between local authorities. That was the solution that we were all to follow. I must advise him-and I am sure he is aware-that progress has been somewhat slow in ensuring that his recommendations were carried out, even though they had universal support from the National Assembly for Wales. It is increasingly difficult, and you can understand why, with people who have democratic accountability, to ask them to work together.

The consequence is that if this proposal and element were taken out of universal credit, we would be left with a range of schemes, loosely delivered, with local authorities exercising their democratic power and other parts of the United Kingdom, if they so wished. I would not dare to ask the noble Lord, Lord Foulkes, to venture an opinion on this, but would it be beyond the wit of the Scottish Executive to say, "We'll take your money, thank you very much. We'll add a little bit of Salmond paste on the top and then we'll see if we can offer a Scottish scheme and then tell you that in England you've got it wrong". I suspect that that is the consequence of this proposal. When we come to Clause 34-and I am not expecting the Minister to give us all the answers today, but we will have another bite at that clause-I would ask that we have the information that was promised for this issue to be before us at that time. The timescales are out of kilter, but I hope that sanity rules in this matter and that we eventually end up with a system that we can all be proud of as being a universal credit system that is universally applicable.

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Lord Skelmersdale: My Lords, we have heard an enormous amount of words, some of them very persuasive, for this amendment. But I find myself remarkably schizophrenic about the whole thing. The noble Baroness, Lady Turner, put her finger on at least half my schizophrenia.

Universal credit is a cash sum. You get it in your bank account, through your giro, from the post office or wherever. Council tax benefit is exactly the opposite. It is a discount; you do not see the money. Therefore, I can see that it ought to be treated in a totally different way from universal credit. On the other hand, you cannot live in a house without paying council tax. This is where my schizophrenia comes in. From your lump sum of universal credit, you are going to pay your rent, and so on, but you have the likelihood of outgoings and you cannot from those outgoings separate out the council tax that you are also going to pay. I wonder whether my noble friend Lord Freud can solve this great dilemma that I have.

Lord McKenzie of Luton: My Lords, I will speak briefly on this issue in support of the amendment proposed by my noble friend Lady Hollis and the exceptionally powerful case made by her and by pretty much every other the noble Lord who has spoken on the issue. The noble Lord, Lord Skelmersdale, raised an interesting point about how you would extract the payment. My noble friend Lady Turner asked whether it was a rebate, a discount or quite what it was.

I recollect that she pressed us in Government on behalf of the Royal British Legion, who were campaigning to have the term rebate replacing the benefit. We all signed up to that at the time. I am not quite sure what progress was made. I think that it went to local authorities. However, I remember that there was a potential price tag of tens of millions of pounds to local authorities just for that one system change. These are not inexpensive projects that we are dealing with. I cannot believe that this is what the noble Lord or the DWP want. The noble Lord is an exceptionally logical person. He analyses things. The scale of the problems that the localisation of council tax would bring seems to me to be totally out of kilter with all of the work and analysis that has gone on in producing plans for the universal credit. As everyone has said, it undermines the universal credit-the benefits of the single taper in particular. With all the raft of issues about how people would understand what their position was, the simplicity of the system would fall away.

We had a meeting with officials. As ever they were very helpful. We explored this issue a little bit. My understanding is that it was not until March of this year that the department started to contact local authorities to get their minds around how it would work. To produce something in a Bill and develop a policy on an assumption that this component can be dealt with separately without any clear knowledge as to how that will work in practice seems unusually foolhardy. Again, I cannot believe that the Minister believes that this is the best way forward. There are lots of practical issues. We know lots of local authorities will have outsourced their arrangements in respect of housing and council tax benefits. You would have to

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break the costs involved in the multiplicity of contracts. I do not know if the Minister has any idea of what would be involved in that exercise.

What we are seeing here is what we have seen in the Localism Bill writ large. There have been a lot of instances where the Government and the Secretary of State have said that they want to devolve power and give more freedoms to local authorities, but have then realised the consequences and drawn those back with all sorts of regulation powers, which, as my noble friend Lady Hollis said, would have to be there if you were going to make any sort of sense of this proposal to have any sort of understanding of whether it is regional systems, which are common.

There is another component as well. It relates to the cut in the total amount available. I agree with the noble Lord, Lord German, that in a sense there are two issues: the financing and what cash sum is available, and how it should be dealt with. This Government have a record of imposing on local authorities and getting them to take the pain, the heat and the difficult decisions, and seeking to walk away scot free. We will see and debate what is going to happen with the social fund. That is another example-no duties on local authorities and no ring-fenced funding from it.

My noble friend Lady Hollis made a telling point. If our understanding is correct-and the Minister will doubtless confirm this-this is switching AME to DEL, the reverse of what I think the Minister himself negotiated so effectively when he was dealing with work programmes. It does not make any sense. I know that the Minister has to do his job. We have all been in the position of defending the indefensible before. However, I cannot believe that it is going to end up as currently proposed because it would seriously undermine the universal credit and all the good work that the Government are trying to do on that.

Lord Freud: My Lords, I am grateful to noble Lords for raising this series of amendments. Clearly a point of real substance has been discussed this afternoon. The group of amendments would have the effect of incorporating help with council tax for those on low incomes into universal credit and state pension credit.

Noble Lords will be aware that we are proposing to abolish council tax benefit and replace it with localised schemes of support to be set up and run by local authorities. The Department for Communities and Local Government is currently consulting on proposals for local schemes in England, as a number of noble Lords have pointed out. This approach will allow local authorities, who determine and administer this tax, to have a say in how the burden of paying for services is shared across their local community, taking account of local priorities.

The Government's approach addresses concerns that have often been expressed about the complexity of council tax benefit and, particularly, that council tax support should not be part of the social security system at all. Nevertheless, in localising support, we need to ensure that the improved work incentives that universal credit will bring are not undermined in any way. We believe that the key principles required to incentivise work can be delivered through local schemes and therefore that localisation is the right approach.

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4.30 pm

Baroness Hollis of Heigham: How, precisely?

Lord Freud: As I was about to say, we will soon publish an impact assessment on the universal credit that incorporates this approach. As noble Lords will be aware, the existing impact assessment assumes council tax in the system. This one will assume council tax out of the system.

Lord Skelmersdale: My Lords, does that mean that in this impact assessment, there will be an assumption that the taper will be the same? That seems to me to be all-important.

Lord Freud: I ask my noble friend to resist pressing me, which I know he enjoys doing, at this moment. Let us wait for the new impact assessment.

Baroness Hollis of Heigham: Will there not be 400 impact analyses?

Lord Freud: The impact assessment that I am talking about is the one on universal credit and how it will respond to the exclusion of council tax. We will not have an impact assessment from DCLG available for some time. I do not know when we will have that impact assessment, but I will write to the DCLG and find out.

Lord Newton of Braintree: That means that this impact assessment will not be an impact assessment of the effect of these proposals on poor people.

Lord Freud: Without being overdrawn on the impact-

Lord Newton of Braintree: I am not going to press my noble friend further, but that is what it means.

Lord Freud: I think noble Lords will be somewhat relieved at the approach and will get quite a lot of information from the impact assessment on universal credit on its own. If it comes out soon, as I expect, there will be an opportunity to debate it again, perhaps around Clause 11, or possibly Clause 8, when we can look at the taper, so there will be a chance reasonably soon to look at the implications again.

Lord McAvoy: Before the Minister passes on to the next issue-that may have been a Freudian slip-he has charmingly used the words "soon" and "very soon" to, quite frankly, parry requests for a wee bit more detail on timing. Can he give us an idea whether the assessments that he keeps referring to are operating at a normal pace? Is there an expectation about how long that should take? Are these assessments that we are waiting on taking longer than he would expect?

Lord Freud: No, we had anticipated that this impact assessment would come out during Committee stage, and I think we said that. I hope I gave noble Lords a reasonable clue when I suggested the opportunities we might have to debate it because I referred to a couple of clauses that, depending on our speed of progress, we will get to soon.

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I shall return to the main topic and the question of pensioners. Noble Lords will be aware that there have been persistent concerns about the low level of take-up of council tax benefit among pensioners. I know that the noble Baroness, Lady Turner, has had this as her absolute central focus. As the noble Lord, Lord McKenzie, pointed out, there was cross-party consensus on the word "rebate" a couple of years ago. Many have argued that the reasons that pensioners are reluctant to claim are because it is an income-related benefit and because they believe that the process for claiming it is complicated and intrusive. We believe that there is a strong and persuasive case that council tax support for pensioners will be better delivered through localised schemes of support. Noble Lords will have seen that DCLG's consultation paper stresses that the position of current and future pensioners should be fully protected.

I will take the opportunity to answer the specific questions raised by my noble friend Lord Newton. The allocation of cash to local authorities will be based on existing CTB expenditure, less 10 per cent. The current cost of delivering housing benefit and CTB is £500 million per year. I am not able to say what the new system will cost, mainly because the consultation that DCLG is conducting has not been concluded.

My noble friend raised the appeal process. The consultation paper does not set out a final view on what that process might be, and it is the subject of one of the consultation questions. The nature of the appeals system will depend on the final design of the system.

To summarise, the approach the Government are taking on the aspects that this amendment raises is the right one. Therefore, I thank noble Lords-

Lord Wigley: Is the Minister going to respond to the point made by Lord German earlier about the application in Wales, Scotland and Northern Ireland? I am sorry to come back to that like a bad penny, and I will try not to do it all the time, but in this instance, it is of direct material consequence, particularly this week when one is aware that the money to freeze council tax, so far as England is concerned, when transferred to Wales, will not be used for that purpose. Will the resource that the Minister sees going to local government in Wales go directly to local government or via the Assembly? Has he discussed this with the Welsh Local Government Association and Assembly Ministers?

Lord Freud: My Lords, without being over-coy on that question, this matter is out for consultation and we expect the responses from Scotland and Wales to be incorporated as part of it. So the answer, I guess, is that it will be looked at in that context. With that, I ask the noble Baroness to withdraw the amendment. I am sure that we will return to the some of the substance later.

Baroness Hollis of Heigham: Yes. Before coming back to some of the main themes that your Lordships have adduced, could I thank everybody who has taken part, because all sorts of issues have come up that I had not fully clicked on? I now have an even clearer sense of indignation at what these proposals might

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mean for-as the noble Lord, Lord Newton, rightly said-the poorest people in the land. I appreciate your Lordships' contributions.

I am sure that the noble Lord, Lord Freud, will take this Committee's views back to his close working colleague Mr Pickles. Bar a couple of open questions, I think they were unanimous in being deeply concerned both about the effect on the individual and on universal credit.

Lord Foulkes of Cumnock: I agree with every word my noble friend says about the revelations that have come out in this Committee, which have been fascinating on both sides. The Government do not seem to have had any support from anyone on any side. Is it not now clear why the Government Chief Whip wanted this Committee hidden away up here, rather than on the Floor of the House?

Baroness Hollis of Heigham: Actually, my Lords, it is oddly enough not about trying to win a vote in the House; that is irrelevant. We are seeking to persuade the department that this proposal is profoundly unworkable as well as profoundly indecent. It has to be taken away to the Leg Committee-to use the shorthand-and rethought. That is what I am trying to do. This is not meant to be a grandstanding effort on the Floor of the House, though it might get even more contributions there. It is trying to strengthen the DWP's concerns between the lines, if I judge it right, and empower it with some of the powerful arguments advanced today by experienced people-a former Minister in your Lordships' House, a former Secretary of State, and in particular people who speak directly from the nations of this country outside England-that this should not and will not run. It should be taken back to the drawing board to think again. Given that consultation on the document finishes on 12 October, this discussion today is designed specifically to take that debate forward. I thank the Committee, because I am confident that they have moved the debate forward.

I will pick up the point made by my noble friend Lady Turner and reiterated by the noble Lord, Lord Skelmersdale, about discounts, rebates and benefits. My noble friend is absolutely right. Discounts and rebates are, for example, a quarter off for a single person. This is a standardised figure, irrespective of the individual's circumstances. That is why it is a discount or rebate.

One of the reasons why the British Legion was campaigning on this-and I stand to be corrected-was that it had succeeded in getting through the proposal that local authorities on a voluntary basis, but in practice fairly universally, awarded a 50 per cent rebate on the old council rates system for those veterans who enjoyed war pensions. I remember the debates vividly. If any council thought it might do otherwise, there was a march to City Hall and they occupied the first three rows in their uniforms and decorations as councillors tried-or did not try-to meet their concerns.

They were seeking a rebate. The difference about a benefit is that it is tailored to individuals' circumstances and council tax benefit does precisely that. That is why

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one cannot put it into the same category as rebates, which are a category which does not depend on means testing.

Three issues have come up today, and I am very much indebted to your Lordships for these. First, there are worries about localisation as such. This was put powerfully by the noble Lord, Lord Newton, and I am very grateful. Added to that were the concerns-which I am sure are right-of the noble Baroness, Lady Meacher: the worry and stress that will affect individuals.

4.45 pm

My noble friend was right to say that it originally came from the 19th century Poor Law, but after the old Poor Law and workhouse system were finally abolished in the mid-1930s, for about four or five years local authorities were responsible for running the social security system. They experienced precisely these problems. They were too small to bear the risk as well as the fluctuations, and it could not feasibly be borne by the inhabitants of the locality. This was one of the powerful arguments which went after the war towards establishing national schemes. So it is back to the past as we go forward. The first argument that was raised-and it was absolutely correct-is the worry that with each localised scheme, each individual's CTB will not be an entitlement, but will be dependent on the circumstances and the finances of each local authority.

I notice that the noble Lord did not use the argument that I expected him to run, which is that local authorities could top up their scheme if they so wished. I am grateful that he did not, because local authorities are facing 30 per cent cuts in their budgets and are having to choose whether to fund the CAB or the arthritis association in the locality. They cannot carry those cuts.

The second issue that noble Lords raised, taken up by my noble friend in particular, was that as a result of these proposals, should they go through, CTB will not be demand-led, but cash-capped. This means that there is a real problem for each individual. There is a real problem for local authorities, whose economies will be various and fluctuating, and in the current situation this is sharper than ever. There will be real problems with take-up. Local authorities that are fortunate enough to do well out of this system will have a surplus. I do not blame them for that. They have a responsibility to their council tax payers, but it means that in two adjacent authorities we may see one rural one seeing its council tax not just frozen but in subsequent years reduced by virtue of reduced expenditure on CTB and its neighbouring authority seeing not only its council tax rising in general but the demands for council tax benefit by the citizens in that authority not being able to be met.

If the first question is about localisation and its problems, the second is what happens when it is cash-capped under DEL as opposed to demand-led, which is what all benefits decently should be. Thirdly, there are the issues that the noble Lord, Lord German, particularly and rightly focused on, which relate to the interlocking with universal credit and the need to understand how these tapers are going to work.

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I was struck by the fact that the noble Lord, Lord Freud, was unusually briefed in his reply. I will not embarrass him by seeking to speculate why that might be. He did not comment on some of the very real questions raised by noble Lords today, except to say that we await a further impact analysis of the effect on universal credit. That will be welcome, but it is not just a matter of the effect on universal credit; what also matters is the effect on the recipients of universal credit who will each be in up to 400 different localised schemes for universal credit. In addition to that master copy, there will also be 400 localised impact assessments, given certain modelling assumptions.

I understand why the Minister was unable to answer on questions of cost. As for appeals, the wording in the document, on page 33, paragraph 9.25 is:

"As the Government is proposing to make local schemes for council tax support an integral part of the council tax system, this might extend to the handling of appeals and we would welcome views."

Finally, I cannot resist making one last point to the noble Lord, Lord German. He is quite right that by the time we got to pages 12 and 13 we had four principles, but on page 10 we had five. So even the civil servant's heart was not in it, because one of the principles got dropped off in the intervening three pages.

I thank noble Lords for their contributions. I hope very much that DWP Ministers and officials will share with their DCLG colleagues the real concerns shared around the House not on a party political basis, but on the part of people who have administered this system in local government and from central government, and are saying loud and clear now that it will not work. I beg Ministers in the other department and their civil servants to think again. With your Lordships' permission, I beg leave to withdraw the amendment.

Amendment 12 withdrawn.

The Deputy Chairman of Committees (Lord Colwyn): My Lords, discussions at this end of the Table suggest that it might be convenient to take a short break. I suggest that we adjourn for 10 minutes, but first I will take the business to a convenient point.

Amendments 13 to 15 not moved.

Clause 1 agreed.

4.50 pm

Sitting suspended.

5.04 pm

Clause 2 : Claims

Amendment 16

Moved by Lord McKenzie of Luton

16: Clause 2, page 2, line 5, leave out subsection (2)

Lord McKenzie of Luton: My Lords, this is a probing amendment, which would delete subsection (2), which states:

"Regulations may specify circumstances in which a member of a couple may make a claim as a single person".

As I say, it is a probing amendment to seek some clarity as to the likely scope of such regulations. I

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accept that the Notes to the Bill refer to circumstances where one member of a couple does not have the right to reside in the UK and is not entitled, so the other member will be able to make a claim as a single person. My question is: what other circumstances might be envisaged? It is understood from the notes circulated that further work is ongoing in this regard, but perhaps the Minister can help us with the following questions. When, for example, a couple are in the process of separation or divorce, will they be treated as being a couple or two individuals? Under what circumstances will members of a couple be legally entitled to live separately and receive universal credit independently of each other? In particular, will there be any scope for individuals who are in an abusive relationship to receive universal credit independently of their partner?

These sorts of issues highlight how convoluted some people's lives can be. There are circumstances where, under existing provisions, people are treated as no longer being a couple: for example, if either or both is in custody, has been released on temporary licence from prison or is a compulsory inpatient detained in hospital under mental health provisions. Those sorts of arrangements exist at the moment. Are they going to be built in to universal credit? In what other circumstances might a member of a couple claim as an individual? I beg to move.

Lord Freud: My Lords, to summarise, the general principle is that a couple should make a joint claim for universal credit to ensure that both members of the couple take responsibility for the claim and obtain support to find work, where appropriate. This principle is already established in jobseeker's allowance for joint claims, and we are extending it to universal credit, so that both members of a couple will have equal opportunity to access the support.

As explained in the briefing material sent to Peers last week, there will be a fairly limited range of circumstances in which only one member of a couple is eligible for universal credit, such as the example that the noble Lord, Lord McKenzie, raised where a claimant's partner is a person from abroad who has no right to reside here. However, there are other circumstances, such as when people are students and so forth, when they will not be eligible for benefit support.

This amendment would remove our ability to make these exemptions. I understand that it is a probing amendment implying a series of questions. We are currently developing detailed regulations on this. There is no intention to change some of the existing protections-the noble Lord mentioned people in custody and people detained in hospital. In the work we are doing, as we build a coherent single system, it is fascinating to see how many different definitions of the same thing there are scattered through the current system. One thing we are doing is trying to get a consistent definition. We have four meanings of the word "work"-or is it five? When you are writing a computer program in code, that kind of thing needs to be precise.

We are going to have to get the timing of when people separate and all that precisely right, and that is work in progress. We are aware of the issue. It is being

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addressed, and it will be much more coherent than it has been in the past for that reason. Therefore, I ask the noble Lord to withdraw this helpful probing amendment.

Lord McKenzie of Luton: I am grateful to the Minister for that information. I am going to have to allocate a bit more of the weekend to catching up on all the briefing material that we have. I understand that there is no basic intent to change the current provisions. I am interested in the range of different definitions. The next group of amendments will touch on that a little as well. I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

Clause 2 agreed.

Clause 3 agreed.

Clause 4 : Basic conditions

Amendment 17

Moved by Lord McKenzie of Luton

17: Clause 4, page 2, line 17, leave out "18" and insert "16"

Lord McKenzie of Luton: My Lords, I shall speak also to the other amendments in this group. Amendment 17 would make the minimum age for universal credit 16 rather than 18. This issue was raised in the other place but, despite assurances, we continue to hold the view that this matter should be reflected in primary legislation. Currently 16 and 17 year-olds are able to claim means-tested benefits if they are in a vulnerable group. Such groups include lone parents, carers, those estranged from parents and those with limited capability for work. They can claim JSA if they would otherwise face severe hardship. Housing benefit can be claimed to meet liability for rent, and they can claim working tax credit if they are responsible for a child or a have a disability.

There are two points that I wish to pursue with this first amendment. Given that there is a bit of a patchwork at the moment with separate benefits, can the Minister put on record what the rules will be under universal credit for 16 and 17 year-olds? Will all the strands of support available via one benefit or another under the existing patchwork of benefits and credits be available in universal credit, and what conditionality will apply? Why not at least encapsulate in primary legislation the prospect of 16 and 17 year-olds accessing universal credit? We accept that Clause 4(2) provides a route for overriding the provisions of Clause 4(1)(a), as does Clause 4(3), but why not have it the other way round and set the 16 and 17 year-old ages in primary legislation?

Amendment 18 is a probe, the purpose of which is to understand other circumstances in which regulations may provide for exceptions to the requirement to meet any of the basic conditions. Can the Minister help us on this? He may again say that this is buried in the mass of notes and draft regs that we have had delivered to us this week. If he does, we will catch up with him soon. Let us get it on the record here. Are there any parallel easements in current benefit and credit provisions that are not being carried forward?

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Amendment 19 similarly probes the circumstances in which it is expected that the regulations in Clause 4(5) will be used. Current benefit provisions cover a range of conditions-namely, presently resident and ordinarily resident-and the basic conditions for universal credit require somebody to be in Great Britain. Will the Minister explain why this formulation has been adopted? What, if any, are the EU ramifications of this formulation? The UK has a number of social security treaties. Will they automatically cover universal credit or will there be a need for some renegotiation or changes to those treaties?

Finally, Amendment 20 is a probe to understand what the regulations may say about who is receiving education and who is not, and therefore who is entitled to universal credit and who is not. It is quite right that most students should rely on income from student support, family or work, but I hope that the Government will not remove entitlement from groups that currently have it. This is what the amendment seeks to put in the Bill. This is an example of where there are different rules for different benefits. Perhaps the Minister will accept that universal credit should be available for students who are parents, lone or otherwise; individual single foster parents; those who have disabilities or are vulnerable and therefore qualify because they are young or living away from parents through difficult circumstances or were previously in local authority care; and those who are refugees studying English. I think those are the current types of arrangements which enable benefits to be accessed. Perhaps the Minister can say the extent to which these will be replicated under the new system. I beg to move.

5.15 pm

Lord McAvoy: My Lords, I ask the Minister for some brief clarification. If I am picking it up correctly, the definitive removal of any option for anybody aged 16 to apply for these benefits under the special circumstances is proposed. I have the benefit-it might not have seemed like a benefit at the time-of 23 years of parliamentary surgeries as a former Member of the other place. There is one thing these surgeries teach you, and that is that there can be no definitives in dealing with human beings. I can certainly recall occasions-not hundreds but certainly scores over the years-when people of that age had special circumstances. I am worried about the reasons for removing the possibility of applying, and about the alternatives being brought into legislation to account for that option being removed. I always worry about definitives and a lack of options, and I would like to hear what the Minister has to say on that.

Lord Freud: My Lords, Amendments 18 and 19 seek to amend the basic conditions of entitlement to universal credit and would in effect limit our ability to provide for exceptions to those conditions. Amendment 20 would create a new regulation-making power to set out circumstances in which certain groups are to be treated as not receiving education: specifically, young people, parents and disabled students. Clause 4 sets out the basic conditions that must be met in order to be entitled to universal credit. These basic conditions are designed to be simple and easily understood, fitting

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together with the support for people in education and for older people through state pension credit. However, as I am sure noble Lords will agree, there are always exceptions to the general rule, and it has never been our intention that these basic conditions will be so prescriptive as to prevent certain groups of people being entitled to universal credit. In that sense, we are entirely in accordance with the sentiments just expressed by the noble Lord, Lord McAvoy.

Amendment 17 seeks to make universal credit adopt the principle that entitlement to support begins at 16 rather than at 18. We intend to maintain the current rules where 18 is the minimum age. This is consistent with the approach taken by the previous Administration, and we see no reason to change it. Equally, however, there are circumstances where people aged 16 or 17 should be entitled to universal credit in their own right. This includes people with responsibility for a child, disabled people and people estranged from their parents. Sixteen and 17 year-olds should be in education or training and not living on benefits. If we were to set the lower age limit to 16, we would send the wrong message to young people and their parents about the value of education and the strength of the family unit.

We will continue to support young people who find themselves in straitened and difficult circumstances through leaving care, family break-up or whatever, at the age of 16. We are not planning to change the rules for care leavers in any way. However, as a result of the last Government's Children (Leaving Care) Act, care leavers cannot usually claim benefits until the age of 18. That is why the Bill makes provision in subsection (3) of this clause, and why I do not think that the amendment is necessary.

Amendment 18 seeks to remove the regulation-making powers that will allow us to provide for exceptions to the basic conditions. While we would still be able to specify some of them through other subsections of the clause, the amendment would limit our ability to make provision in all cases. I am sure that noble Lords will appreciate the importance of flexibility in these matters. The power can in any event be used only to extend eligibility, not restrict it.

Amendment 19 would remove subsection (5), which allows us to make regulations in respect of residence and presence. We have been clear that migrants will generally be able to claim universal credit only if they have a right to reside here and are habitually resident. This position has not changed-and was reiterated by the Secretary of State and Minister for Employment just last week. In the tough financial conditions we currently face, it is particularly important that UK taxpayers should not have to subsidise people with very tenuous links to this country. "In Great Britain" is the same formulation as in the primary legislation for income support. Nothing sinister is implied by the wording.

On the question of the noble Lord, Lord McKenzie, about the EU ramifications, we do not expect to have to renegotiate social security treaties, although he will be aware that there is considerable movement currently going on about export of benefits, which we are concerned about. Removing the powers in this subsection would also prevent us providing for circumstances in which a

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person can be treated as being in Great Britain although they are temporarily absent. Current provisions allow us, for example, to pay benefits to people who may have gone abroad for a short period of time to receive medical treatment for themselves or their children. They also, in the case of tax credits, ensure that service personnel and their families are not prevented from claiming because they have been posted overseas. We want to replicate this position within universal credit. The amendment would prevent us doing that. This is a valuable thing for us to be able to do: I am sure that that is not a contentious claim to make in this Committee.

Amendment 20 would require the Secretary of State to specify the circumstances in which certain groups will not be treated as receiving education. There is a long-standing principle that in general the benefits system should not be a source of financial support for those within the education system. Young people are primarily the responsibility of their parents until they leave school. Students in higher education have access to a comprehensive system of student loans and grants. However, there have always been exceptions to the general rule and, as the Minister for Employment made clear during debate in the other place-and I am happy to repeat here-the current boundaries that exist in relation to income-related benefits will not be redrawn.

We do not wish to widen the extent of support for those in education. Nor do we intend to remove support from those groups of young people and students who currently receive it under the current system, such as lone parents, disabled students and youngsters in non-advanced education who are living independently. The powers we need to do this are already contained in subsections (2) and (6)(b) of the clause. We do not need to make the extra provision that this amendment would provide.

I apologise if that was a lengthy summary of our position. I need to track back a little bit because I may have inadvertently misled noble Lords on the point of support for care leavers. I want to make absolutely clear with regard to care leavers that our support is constrained by the previous Government's Children (Leaving Care) Act, which starts the clock for them at 18. I think that I inadvertently said 16 earlier and want to make sure that that is absolutely clear and on the record. With that explanation and assurance, I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: I am grateful to the Minister for that explanation. As I hope I explained, these were probing amendments to get answers on the record.

I shall follow up on two points. On Amendment 17 concerning16 and 17 year-olds, there are currently different rules for different benefits. There is the JSA rule and rules for other means-tested benefits. For the latter, you must be in a vulnerable group: for JSA, you must be facing severe hardship. Given that we end up with just one benefit, universal credit-plus a bit of council tax-will all the easements for 16 and 17 year-olds be reflected in the universal credit, or only some of them? As I understand it-I am not sure that I have my mind fully round this-there is currently a patchwork

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of provision, and it is a question of seeing whether that is brought forward in its totality.

That is the first question. I will pose a second one as I see that the team are working hard at the back there. In relation to definitions around residence, I think that the noble Lord said that "in Great Britain" is used for income support. Certainly, the text that I have is that you must satisfy the "habitual residence" and "right to reside" tests and be "present in Great Britain". I accept that there is nothing sinister in it, but I am trying to understand what "in Great Britain" actually means. Does it mean physically here, and that you have to remain physically in Great Britain throughout the period for which you are seeking to claim? What about periods abroad for whatever reason? It looks to me as though that is a change of formulation. It may just be an attempt to simplify the language, but I am a little mystified by it. Perhaps the Minister can help.

Lord Freud: Yes. On the first question about all the rules, our intention, from the policy principle area, is to reflect the current rules. I am hesitant to make an absolute commitment because I am conscious of our work to smooth them out, and there may be some wrinkles. Wrinkles do appear in this area, surprisingly. The main principle and direction will be to take them over in their entirety in the universal credit. Clearly, to the extent that there are wrinkles, when we get to regulations-in some time-we will end up discussing them. We will be able to look at that and discuss it at the appropriate time, but that is the general policy intention.

The expression "habitual residence" is the one used in secondary legislation. That reflects what the primary legislation says, which is "present in Great Britain". That is the relationship. Clearly, "present in Great Britain" now has a case-law framework around it to define what it really means. Can you pop over to Calais for lunch and still be present in Great Britain?

Lord McKenzie of Luton: Not on JSA rates.

Lord Freud: There are some very cheap fares now; £12 return on P&O, I think. So maybe even on JSA you can have the occasional treat. Joking apart, there is a context and an understanding. We are not planning to change that. Clearly, when one abandons those key words it has a lot of ripple effects, not least in the social security treaty network that we have.

5.30 pm

Lord McKenzie of Luton: I am grateful to the Minister for each of those additional explanations. I understand the point about the terminology being primary and the secondary legislation having these other descriptions. Could I ask the noble Lord about this current debate on the exportability of benefits and their components? How, if at all, does he see the universal credit fitting in to that debate?

Lord Freud: We expect the universal credit to be treated as social assistance, which is within the rules, so we can keep a reasonable amount of control over it.

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This is something that is causing great concern to countries throughout Europe. The European Commission is taking infraction proceedings against us. Twenty members have expressed strong concern. Fourteen member states have joined the UK in calling for a debate on the matter with a view to amending EU social security rules as soon as possible. This is a live and changing issue but currently, as we understand it-nothing is locked down in this area-we have designed the universal credit in a way that it is protected from some of the exportability concerns. That is our intention.

Baroness Hollis of Heigham: Could the Minister help us a bit further? It might be more helpful to have a letter on this later on. The benefits that he is bringing together have different rules-or they had different rules-according to whether they were regarded as coming within the free movement of labour and the support for this through some of the tax credit rules and some of the other benefits that were localised and related only to being present and so on. By bringing them all together, does this mean that, for the first time, universal credit, with a much bigger price tag-so to speak-on the individual entitlement, could now be freely exported to people who are coming to work in this country and whose family members are living in other European countries?

Lord Freud: As with the current income-related benefits, workers who come into the UK from other European Economic Area countries may be entitled to universal credit, but only if they meet stringent conditions. This ensures that the benefit tourist cannot take advantage of our benefits system. European Economic Area nationals who are neither in work nor seeking work will not generally be able to access universal credit. They will be required to be self-sufficient while they remain in the UK. Let me stand back generally. This is not currently a stable area of EU law and we are watching it very closely for the reason that the noble Baroness raised.

Baroness Hollis of Heigham: If the Committee will excuse me, I have one further point. One of the things that I thought was deeply unfair, but about which we could do nothing, was that a British citizen who took her child to Bangladesh, Pakistan or India for 12 weeks or so thereby lost her child benefit. However, if a worker from one of the eastern European countries came here, and their family had never even visited the UK and their wife and children and so on remained in their home country, they were able to continue to enjoy such benefits.

Lord Freud: I am slightly at a loss to respond, mainly because the noble Baroness has opened the door to such an enormous area. It is so complicated that I have spent quite a long time going through it. Yes, there are lots of anomalies because it is not a stable area of law, but the bottom-line point is we do not think that with universal credit we are putting ourselves in any worse a position than that we are currently in.

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Lord McKenzie of Luton: I am grateful to the Minister for those explanations. At some stage may we have a little note which sets out the existing benefits and components that are going to go in to universal credit and what the exportability issues and access by non-residents are? That would be helpful to us. We accept that this is a moveable feast, but a note based on our best understanding as of today?

Lord Freud: Having checked with my officials, I am happy to provide a letter summarising the position. I have had a reasonably recent brief on it, and although I cannot remember the detail, I will get the salient points circulated.

Lord McKenzie of Luton: I am grateful for that and for the other explanations we have received. I beg leave to withdraw the amendment.

Amendment 17 withdrawn.

Amendments 18 to 20 not moved.

Amendment 21

Moved by Baroness Hayter of Kentish Town

21: Clause 4, page 3, line 3, at end insert-

"( ) Prior to the implementation of regulations made under this section, the Secretary of State shall initiate and respond to a public consultation concerning the operation of the claimant commitment."

Baroness Hayter of Kentish Town: I beg to move Amendment 21, which stands in my name and that of my noble friend Lord McKenzie. It relates to subsection (7) on the top of page 3; an important, albeit small clause, stating that,

Amendment 21 would add:

"Prior to the implementation of regulations made under this section, the Secretary of State shall initiate and respond to a public consultation concerning the operation of the claimant commitment".

Central to the Bill, as my noble friend said in an earlier debate, is the twofold aim of supporting work for those who can work alongside providing security for those who cannot. Key to the former is the availability of work, as was stressed by the noble Lord, Lord Wigley, who is not in his place now, but also assisting those who can work back into the workforce after a period of unemployment, illness or injury or the raising of children.

As the Government have reiterated, one aspect of returning to work or entry to the workforce lies firmly in the hands of the potential employee or claimant of universal credit under this clause. This is not new and not simply from when my two noble friends were Ministers, but, as briefings provided by DWP have said, the requirement to seek or accept suitable work has long been part of the benefit system. Indeed, it has been a condition of receipt of unemployment benefit for 100 years, since 1911 when the system required claimants not to have left work without just cause and

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disqualified them if they refused to accept a suitable offer of employment. So, in slightly new wording, the Bill seeks to capture that responsibility and to enhance it by way of a claimant commitment. What is new is that for the first time, this covers those in work.

Commitment is an interesting choice of word. Any dictionary tells us that a commitment is an obligation, a promise that restricts one's freedom of action. That is fine. The problem is that such a commitment appears one-sided. It lays obligations on the claimant but, unlike the National Insurance Act which offered a guarantee of unemployment insurance for a fixed period for those who paid contributions, we are told nothing as to what commitment the state will make to the claimant under universal credit. Yet looking or preparing for a job is meaningless if no employer is under an obligation, or indeed helped, to create or provide jobs. There is also no commitment for an employer to be willing to take on someone who perhaps lacks an established work record or satisfactory referees, or someone who may have lost their job-for example, in Sheffield because the Government refused the loan to Sheffield Forgemasters, or in Derby because the Government did not help with a vital contract there, as my noble friend referred to earlier this afternoon. A one-sided commitment will mean little if the Government do not work with employers as actively as they work with claimants. I hope I may be forgiven for quoting something I said at Second Reading. It is a quote from the Work and Pensions Select Committee in the other place, which called on the Government,

Those were wise words which I repeat today.

There is also no commitment that a parent will be better off in work, despite the voiced aim of the Government, due to the strong likelihood that support for childcare costs for working parents will be reduced. Modelling by Gingerbread and the Resolution Foundation suggests that under one of the Government's options, to pay 70 per cent of childcare costs up to £125 per week for one child, a single parent on minimum wage who needs childcare for each extra hour of work would keep only 6p out of each pound earned for each hour over 24 hours per week. That is hardly a just reward, and certainly higher than the 50 per cent tax rate that so upsets Boris Johnson. With the option of paying 70 per cent of childcare costs up to £210 per week for two children, a second earner on £7.20 an hour would keep only 9p of each pound earned and would take home no extra cash at all from working beyond 30 hours per week.

We are still awaiting an announcement, perhaps very soon, on how childcare is going to work under universal credit. But how can a claimant commit to take a particular job if they are not sure that they would be better off after paying for childcare? The draft regulations state that if there is no suitable and affordable childcare that may, at the discretion of the adviser, be good cause for turning down a job offer, but it is not a certainty.

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