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Lord Swinfen: My Lords, before my noble friend sits down, will she tell the House whether there is a legal definition of the word "partner" in the sense in which it has been used this evening?

Baroness Cumberlege: My Lords, I have been on this territory before when the noble and learned Lord,

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Lord Hailsham, asked me to define the verb to "ring-fence". On that occasion, I referred my noble and learned friend to the dictionary and said that I would find a definition for him. I will search.

6.15 p.m.

Baroness Hollis of Heigham: My Lords, I think that the definition which the Minister seeks may be found in social security legislation dealing with cohabitation. There is a notion of cohabitation which is well established in social security law. That may be helpful to the Minister.

I understand the anxieties raised by the noble Baroness, Lady Faithfull. But she referred to an elderly person perhaps employing a niece who lived outside the home. But as we have lost the previous amendment, elderly people will not receive direct payments. Therefore, the people who may feel pressured in the way that the noble Baroness described would not be eligible for direct payments in any event because those payments are confined to recipients aged under 65. Therefore, that situation is less likely to arise.

As regards who may be eligible and who counts as a relative--and I say this in response to the comments of the noble Lord, Lord Campbell of Croy, the noble Baroness, Lady Seccombe, and the Minister--we are talking about close relatives and the family. But one can see that if we look at paragraph 24 of the consultation document, we are not talking about close family at all. One of the problems is that the number and range of people caught by the provision is extremely wide indeed.

I have always understood "close family" to mean children, parents, siblings and spouse. But many others may be banned from employment as carers. Such a person may be somebody living outside the home, living across the city, who may be, for example, a trained nurse or someone who has worked for the local authority in the past as a home help carer. It may be somebody with a great deal of relevant experience who the disabled person would wish to employ because they are familiar and comfortable with each other. The Government's definition of a "close relative" is a parent, parent-in-law, aunt, uncle, grandparent, son, daughter, son-in-law, daughter-in-law and also a stepson or daughter, brother, sister, or the spouse or partner of any of those. Therefore, the partner of a stepson living across the city is regarded as a close relative. I suggest that the Minister may wish to consult a dictionary as regards what counts as a "close relative". Can a close relative really be said to be a stepson or stepdaughter or the partner of the stepson or stepdaughter? The partner of a stepson may well have been a nurse. Indeed, they may have come into contact through the needs of the disabled person. Apparently such a person is to be banned from being employed.

I would have far less of a problem if we were talking about immediate family. One understands that the Government may not wish to pay for the care that one expects to be provided within the family. I do not believe that there is any disagreement about that. We go along with the distinction which the Minister draws

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between somebody being within the household and outside the household. But the point is that the categories of people who may not be employed are so widely drawn that it seems to narrow unreasonably the choice of people from which a disabled person may wish to choose a carer who may have to perform such intimate tasks as, for example, toileting and bathing.

It seems to me that the real issue is to ensure that the disabled person is not pressured against his or her will or judgment to employ someone who they would rather not employ because, in some sense, that person is a member of the family. That is the real issue. Surely we can address that concern if we ensure that the choice for a disabled person is an informed one and that it is only possible with the consent of the local authority; in other words, the local authority must be satisfied that it is sensible and reasonable for a disabled person to employ, say, the partner of a stepson who lives across the city. Indeed, it is possible that such a person has only recently become the partner after starting off by being the nurse. However, at present, he or she would immediately be disqualified in such a situation.

As it stands, we cannot make the provision work. The best way of overcoming our difficulty would be for the Minister to give the House an assurance tonight--or, perhaps, return to the matter on Third Reading--that the discretion of the local authority, which the Minister said is in place, for difficult circumstances such as AIDS, ethnic minorities and, indeed, in rural areas, will be enhanced so that to employ any relative within the paragraph 24 definition the consent of the local authority must be sought and obtained. The discretion of the local authority should not be unduly fettered.

That may be the way for us to square the circle. The local authority must be satisfied that the disabled person is not being unreasonably pressured. If it was necessary for the local authority in such a case to be satisfied that it was reasonable to employ such a person, that would meet all of our objections. I hope that the Minister will be able to give us some encouragement in that respect, so that we may be able to revisit the matter on Third Reading.

Baroness Cumberlege: Yes, my Lords, we shall certainly have another look at the matter.

Baroness Hollis of Heigham: My Lords, in that case, I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Swinfen moved Amendment No. 7:


Page 1, line 23, at end insert--
("( ) The Secretary of State may issue guidance to authorities concerning the inclusion of a value added tax element in the calculation of a direct payment.").

The noble Lord said: My Lords, in moving the above amendment I shall speak also to Amendment No. 9. Amendment No. 8, tabled in the name of the noble Baroness, Lady Hamwee, is also included in this group. The purpose of the first amendment is to allow local authorities to meet the costs of value added tax if incurred in the purchase of care. The consultation

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document on direct payments issued shortly before the Committee stage--indeed, very shortly before--indicates that the Government do not aim to set a floor or ceiling on the amount of cash payment, but that they expect local authorities to make payments only where payments are at least as cost-effective as equivalent services. The amendment would ensure that the Secretary of State could issue guidance to local authorities concerning VAT, where such tax may be incurred. This is likely to be in a minority of cases, but without any element to cover VAT disabled people may face financial hardship or may have to reduce the number of hours of personal assistance that they receive.

After the Committee stage, my noble friend the Minister wrote a letter on VAT to our mutual noble friend Lord Jenkin of Roding, who unfortunately cannot be with us this evening. She was kind enough to send me a copy of that most helpful letter, which I appreciate. However, the letter did not cover all the circumstances. Currently, no VAT is payable on services provided, first, by agencies that are below the VAT threshold of £47,000 a year; secondly, by charities that provide care on a not-for-profit basis; and, thirdly, by agencies employing professional services of medically qualified staff, including unqualified staff under the supervision of qualified staff. However, the distinction between medical and social care is often hard to draw: for example, when is giving someone a bath considered to be social care or as being medically necessary?

So far as concerns direct payments, people who employ their own personal assistant, or who employ professional nursing staff, or agencies operating below the VAT threshold, would not be liable for VAT. But a problem may arise for the minority who may use the services of a home care agency which charges VAT on the services that it provides. VAT can only be recovered by people who are registered for such purposes, which includes local authorities when they are fulfilling a statutory obligation but not individuals.

Since the last stage of the Bill, I undertook some research through one of the care agencies in South Wales which is run by the John Groom Association for the Disabled, for whom I work. I am advised that 75 per cent. of the agencies in that area providing domiciliary care are liable to VAT as they are not medically qualified agencies. In the meantime, I have been talking to the United Kingdom Homecare Association which, although it has no firm figures, estimates that some 40 per cent. of agencies providing home care throughout the nation are liable to charge VAT.

The amendment would give the Secretary of State powers to issue guidance to local authorities about how VAT is handled. My concern is that disabled people who may choose to have some or all of their hours of personal assistance covered by agencies which are liable to that tax, are not unduly penalised for doing so. That is not likely to happen in the vast majority of cases as all the evidence so far indicates that the proportion of hours covered by such agencies is likely to be small. Indeed, the attraction of direct payments schemes for many disabled people is the opportunity to have choice

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and control through directly employing a personal assistant, rather than simply transferring from a local authority service to a private agency service.

Experience from the people who have received cash payments from the Independent Living Fund indicates that those who have used agencies have done so on a limited basis. As I understand it, only 44 per cent. of users in south-east London were using, or have used, agencies. However, as those agencies tended to be more expensive, users also tended to top up their ILF payments. The ILF has confirmed that currently payments from the fund include an element of VAT if the recipient indicates that that will be payable when he receives an offer.

In Committee my noble friend the Minister stated that, although VAT is not due on direct payments made by local authorities, some individuals receiving payments may have to pay VAT if receiving services from agencies which charge VAT; so I know that my noble friend is aware of the situation. However, service users will not incur VAT and if the intention, therefore, is to ensure that service users and payment recipients are dealt with in a similar fashion, people who use agencies and incur VAT as a result should not be disadvantaged in comparison with a service user. Without an element for VAT, some people using direct payments could face hardship. That is the situation that I should like to see addressed through guidance.

The purpose of Amendment No. 9 is to ensure that payments include not only elements for VAT but also for national insurance contributions, tax, advertising and all the other costs of employing an individual. The Independent Living Fund or social services indirect payments schemes have never had the same financial commitment enjoyed by equivalent indirect payment. There is no logic to that, other than that disabled people have accepted much lower payments when the schemes originated because they were only too willing to break free from direct services.

By and large, one encounters similar overheads in managing one's own care to that experienced by a larger organisation in establishing similar provision. If one is running a small business and hiring and maintaining staff, costs such as sickness and holiday pay, insurance, recruitment costs, accountant and possible payroll support and employers' National Insurance contributions must all be taken into account in addition to the hourly rate. In most cases, the hourly rate and a small amount of holiday or sick pay is all that is presently offered by the user--and, indeed, to the user--by the payer.

I understand that the Government are likely, through my noble friend the Minister, to tell me that it is the responsibility of individual local authorities to make such decisions. In Committee, my noble friend said that she believed that it should be left to local authorities to decide what the level of direct payments should be. However, when replying to my amendments I wonder whether my noble friend can let us know whether she is prepared to refer the matter to the Technical Advisory Group so that those who are looking into the technical aspects of applying the Bill can take a proper look at the problem. I beg to move.

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6.30 p.m.

Baroness Hamwee: My Lords, Amendment No. 8 is in my name. I shall seek not to repeat too much of what the noble Lord, Lord Swinfen, has said with regard to VAT as the amendment is addressed to the same issue although it goes rather further. As the noble Lord has explained, not all care agencies are able to avoid charging VAT, if I can put it that way round. This amendment seeks to tackle the problem of those who wish to purchase services from an agency. That, of course, will not comprise all the clients to whom this Bill is addressed, nor all the agencies. Therefore, to that extent, it is a relatively confined problem. I have sought to suggest a way in which the advantages of local authorities with regard to VAT are retained without putting local authorities and clients back into the position from which we are seeking to move them. The financial memorandum to the Bill states that the provisions of the Bill will be implemented within existing resources. That is not quite the same as saying that it will be cost neutral, because it raises the spectre that it might be an income-generating provision for the Government, in that VAT will have to be charged and paid--and will therefore accrue to the Exchequer--where it is not at present. I hope that the Minister can reassure noble Lords that generating income is the last thing that is in the Government's mind with regard to the area we are discussing.

I suggest, through this amendment, that a client may use a local authority as his or her agent to purchase the care and in that way avoid VAT. I use the word "avoid" and not "evade". That may not be a technically sound suggestion. If it is not, I hope that the Government will recognise the problem and will be able to suggest another mechanism to resolve it. I am concerned that, if the VAT element--an extra 17.5 per cent.--has to be borne by the user, it will be an unnecessary and inappropriate constraint in the choice of service. I appreciate that, if it is borne by the local authority, in a sense that would mean moving funds around between tiers of government. However, I shall not discuss at this stage whether this VAT element will be recognised in SSA and grant. Perhaps that is too detailed a point to discuss now. However, it would be sad if what is really a peripheral matter affects--perhaps fundamentally--the choice of service.


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