My noble friends Lady Parminter and Lord Borwick, as well as the noble Baroness, Lady Kennedy, asked about the bad debt situation. We are firmly of the view

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that regulation should not always be the first resort of government. The effectiveness of measures to manage debt differs significantly between water companies. We want to see this change. At present, customers in some regions are paying much more than others to cover the cost of unpaid bills. We are making sure that the industry’s worst performers are challenged to match the performance of the best. The industry is already taking more responsibility in this area. It is working on a voluntary approach to sharing data and information on customers in rented accommodation through the landlord database which will be launched in March this year.

Several noble Lords, particularly on the opposition Benches, raised corporate governance and water company structures. Customers rightly expect governance standards in a regulated industry to be high. Questions about these standards go to the heart of the sector’s public legitimacy, which is why Ofwat is taking action to ensure improved standards of governance across the sector, ensuring that it leads the way in corporate governance. It is right that the independent regulator tackles these issues. The water companies’ licence makes clear that they are expected to be transparent about their board leadership, financial structures and governance arrangements.

Recently, Ofwat has consulted on new voluntary principles relating to board leadership, transparency and governance. We particularly support the drive for increased independent and customer representation on boards. For the record, I probably should say that I do not agree with the characterisation of the noble Viscount, Lord Hanworth, on the position regarding Thames Water and the Thames tunnel but he would not necessarily expect me to. My noble friend Lady Humphreys raised the Welsh water model and I welcome her comments. I note that different water companies excel at different things but no one model has been shown to have been better than any other. That model is popular with customers but I venture to suggest that the not-for-profit structure has not resulted in particularly outstanding performance on some key issues—for example, customer service or management of customer debt.

Turning to the insurance part of the Bill, I fully appreciate concerns raised in relation to those properties which are at the very highest risk of flooding or which some people have termed as genuinely uninsurable. I should like to make clear that all those properties will be included in Flood Re at the start of the scheme. However, over time, Flood Re may develop an approach for properties that flood very frequently that will help to reduce the impact of their claims on the scheme's affordability. For example, Flood Re could suggest resilient repairs and, if these were not taken up, could set higher premiums or excesses. Only in the most extreme cases would exclusion from Flood Re be considered.

My noble friends Lady Parminter and Lord Sheikh, the noble Earl, Lord Lytton, and the noble Lords, Lord Grantchester and Lord Whitty, all raised the issue of climate change and resilience and information to households. I recognise the strength of opinion on this important issue and share many of the views

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expressed. We welcome the constructive contribution of the adaptation sub-committee and recognise the need for Flood Re to publish a plan for transition to the free market. The Bill provides for that. The ABI has just come forward with some thoughts on providing information to householders in Flood Re about their flood risk. Discussions on the details of this and on incentives to drive the uptake of household-level resilient measures are continuing and I will provide a further update on this issue to your Lordships in Committee.

I am running short of time. Noble Lords have raised important issues about the various categories of exclusion. I hope that noble Lords will forgive me if I confine my remarks to saying that Flood Re is designed to help those who are struggling most to afford rising insurance premiums. Flood Re targets financial support to those at the lower end of the income spectrum by providing proportionately more support to those in council tax bands A to C. In designing Flood Re, a balance has had to be struck between supporting those at the highest risk and managing the impact on those at low risk. Including additional policies within Flood Re could not be achieved without decreasing the level of support going to those most in need or increasing the levy paid by all households. Perhaps we can talk further either before or during Committee about the specific issues of 2009 properties, business properties and council tax band H, which noble Lords raised.

The noble Lord, Lord Cameron, and my noble friend Lady Bakewell of Hardington Mandeville raised the issue of what has been going on over the past few weeks on the Somerset Levels. Flooding has had a devastating effect there and in other parts of the country. The Somerset Levels are among the most seriously affected and people have had to endure flood water and disruption for several weeks. It is incredibly hard for them and I know that all noble Lords share my sympathy for them. Local authorities, residents and the emergency services have been working around the clock to make sure that people are safe and to help with the clean-up.

We have been talking with local agencies about what more can be done and we have asked the Environment Agency for a detailed analysis on the proposed major dredging and any other action that can be taken to manage flood risk on the levels. A local task force has been set up comprising local partners and communities to develop a clear, long-term vision for the future of the Somerset Levels and moors. My right honourable friend the Secretary of State has been in Somerset today talking to local people, and the noble Lord, Lord Grantchester, should not necessarily believe what he reads in the red tops.

We talked about the need to keep water available and affordable and to continue to improve the environment. We also mentioned the importance of the provisions on flood insurance for the future availability and affordability of cover. This underlines the importance of the issues that we have been discussing today and will discuss over the coming weeks. For this reason, I am grateful for the many contributions today and I look forward to the debates that will follow.

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I hope that in my few closing remarks I have been able to deal with some of the issues raised by noble Lords during the debate and I apologise that I just do not have time to come to them all, but I know that one way or another over the next few weeks we will do so. Once again, I commit to having further discussions inside and outside this Chamber with noble Lords on their concerns. If any noble Lord wishes to raise a concern, my door is always open. In the mean time, I commend this Bill to the House.

Bill read a second time.

Special Educational Needs (Direct Payments) (Pilot Scheme) (Extension and Amendment) Order 2014

Motion to Approve

8.20 pm

Moved by Lord Nash

That the draft order laid before the House on 7 January be approved.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments.

The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con): My Lords, this order enables the Secretary of State to extend and amend the pilot scheme made under the Special Educational Needs (Direct Payments) (Pilot Scheme) Order 2012 that allows the testing of direct payments for SEN provision in the SEN pathfinder areas. The pilot scheme has demonstrated the potential for SEN direct payments to make a positive—“life-changing”, to quote one parent—impact on families. I have seen first hand the benefits that direct payments can bring. When I visited the Hertfordshire pathfinder I met another parent who used a direct payment to pay for a personal assistant to take her disabled child swimming, allowing her to focus on spending time with her other child. Other examples of the use of direct payments are for transport, one-to-one learning when the child is not well enough to travel to school, personal assistants coming into the classroom or the purchase of equipment. It is this choice and innovation that we are bringing to SEN provision and why, as noble Lords will be aware, we have taken forward the learning from the pilot in provisions for personal budgets in the Children and Families Bill.

The Bill is now reaching the end of its journey through your Lordships’ House and through Parliament so it is important to set out why it is also necessary to amend and extend this pilot scheme. There are two key reasons. First, extension is necessary to allow the arrangements established with families under the pilot to continue until the provisions in the Children and Families Bill are commenced. Extension will also provide a transitional period, up to the end of September 2015, to move these families from statements on to the new system of education, health and care plans and the associated offer of a personal budget that entails. As I have already said, many of the families that have

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taken advantage of the scheme have seen real benefits. Failure to extend the order would mean that these families would need to revert to more traditional, and in their cases, less effective forms of service delivery.

Secondly, the extension will allow the authorities named in the order to enter into new arrangements with families and refine how best to operate SEN direct payments right up to the point of implementation of the reform programme. This will ensure that we have the best possible evidence base ahead of implementation. It will inform both the work of the personal budget champions and the thematic evaluation of personal budgets, including direct payments, being undertaken as part of the evaluation of the pathfinder programme and due to be published in the summer. Removal of the right to request a direct payment under paragraph 3 of the schedule to the 2012 order after 31 August 2014 will provide for the formal closure of the pilot to new entrants from 1 September 2014. I should stress that all other articles in the pilot scheme remain unaltered.

To conclude, this is a simple transitional provision that bridges the gap between the end of the pilot scheme as set out in the 2012 order and the introduction of the reforms as set out in the Children and Families Bill. As such, I hope that noble Lords will give it their support.

Baroness Morgan of Ely (Lab): My Lords, I am sure that all noble Lords will welcome any effort to develop a system that would lead to improvements in the effectiveness of the provision of services to individuals with special education needs. The educational requirements of individuals with special educational needs are, by definition, likely to be varied and need to be special. Intuition would tell us that these needs may best be fulfilled by services that are chosen and arranged specifically for each individual. Placing the responsibility of managing funds with families gives decision-making power to those who care most about their children—parents or carers with children with special education needs. That can, in principle, help to improve the suitability of services and result in better educational outcomes.

When advocating autonomy for those individuals receiving direct payments, we do, however, need to bear in mind a few issues. It must be ensured that the diversion of funds to personal budgets does not lead to a reduction in the standards and quality of services which we know are delivered by most well organised local authorities at the moment. This is a known concern of many parents and professionals in the sector itself. We must also be assured that the quality of outcomes for those young people on the direct payments scheme will not fall below the standards we have learnt to expect from service delivery by local authorities.

Although the principle of allocating discretion to families is a positive one, there are no guarantees that providing families with the discretion to organise their own services will necessarily deliver adequate educational outcomes. Reports from the ongoing pilot have suggested that real benefits to the young people concerned and their families occur mainly from the enhanced control regarding the organisation of transport. Further evidence

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from the pilot is needed to ensure that, if this is indeed the case, benefits are restricted to the organisation of transport. We need to see that the scheme is sufficiently justified.

Some individuals may have no desire to organise their own service provision. This may be due to the individual already receiving suitable support of a high standard or because the family concerned feels unable to arrange a better service itself. In such cases, the direct payments scheme must not be made mandatory. In cases where direct payments are requested, sufficient support must be made available to ensure that individuals who may experience difficulty with implementing their own arrangements can do so effectively. Concerns were raised regarding this issue when the Minister of State for the Department for Education shared the worries expressed by respondents to the initial consultation regarding these proposals.

Assurances must also be given to taxpayers regarding the value for money provided by the direct payments initiative. When specialist services are provided from small markets with limited choice, such as those which exist in the provision of transport for people with a physical disability, it must be ensured that a limited market does not inflate prices. The interests of the taxpayer must also be safeguarded from the inevitable fragmentation of budgets caused by dividing funds between service providers, which may cause losses from diseconomies of scale.

However, the need for an extension is accepted. The slow progress which the direct payments pilot scheme has experienced has necessitated its extension. It also makes sense to wait until the Children and Families Bill has gone through its legislative process. If more time is needed for the assessment of this scheme before a potential larger-scale rollout, the time must be used to develop confidence in the practical successes of devolving SEN provision budgets. If this confidence is instilled, progress can be made in realising the implementation of the scheme on a countrywide scale, but it would make sense to wait until the pilot has had an extended run.

When the Secretary of State lays his report before both Houses, after the conclusions of this pilot study are produced, the concerns aired by the critics of this piece of legislation will need to be considered with respect and reason. In the mean time, it is essential that the concerns which have been highlighted today are borne in mind. Further evidence gathered from the pilot scheme must demonstrate that the direct payments method for SEN provision indeed provides value for money and delivers high-quality services, yielding acceptable educational outcomes for all young people with special educational needs.

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Lord Nash: My Lords, I am grateful for the noble Baroness’s comments and her support for the scheme. Extension of the scheme will allow families to continue to benefit from SEN direct payments and refine our knowledge right up to the point when our reforms come into force.

So far as ensuring that direct payments do not affect other services, paragraph 11(c) of Schedule 1 requires local authorities to consider the impact on services for other users before they can agree an individual arrangement. We do not have any evidence from the pilot that this has been an issue. We will take forward similar protections in regulations to be made under Clause 49 of the Children and Families Bill. The noble Baroness is quite right that, so far, transport has been the main area that direct payments have been used in. However, it is early days and it is inevitable that people will be slow to take this up. It is also clear that there are many other areas where people have benefited. In addition to allowing transition and continuing the scheme for those people who have already taken it up, it is important to continue with the learning.

I entirely agree with the noble Baroness about making sure that we achieve value for money for the taxpayer. My conversations with local authorities in relation to both the local offer and direct payments have so far been surprisingly positive in the sense that some people may have thought that allowing more flexibility would increase costs. Allowing a more discursive and inclusive arrangement for this kind of provision seems in many cases to have led to less contention and therefore less costs.

Measures for accountability and quality control will be taken forward under regulations to be made under the Children and Families Bill. For example, the EHC plan must set out details of the needs and outcomes to be met by a personal budget and the arrangements for any use of direct payments, including for services, the amount and frequency of the payments, and the arrangements for review. As with the pilot scheme, Clause 49 will require a review of the use of direct payments at least once within three months of the direct payments being made, at the end of the first year, and at appropriate intervals thereafter not exceeding 12 months.

We will have further opportunities to debate SEN direct payments and personal budgets more generally when we scrutinise regulations to be made under the personal budgets provisions in the Children and Families Bill. With that, I hope that we can agree the order.

Motion agreed.

House adjourned at 8.31 pm.