House of Lords - Explanatory Note
Welfare Reform And Pensions Bill - continued          House of Lords

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Clause 56: Incapacity for work: Personal Capability Assessments

The clause replaces section 171C of the Contributions and Benefits Act, which provides for the All Work Test. New section 171C for the most part mirrors the existing provision for the All Work Test, but renames it the Personal Capability Assessment. It also enables the Personal Capability Assessment to be carried out before a person technically becomes subject to the assessment. The intention is to speed up the process and secure a proper assessment of people's needs at an early opportunity. The section also ensures that the Personal Capability Assessment may be repeated, to determine whether a person continues to be incapable of work.

New subsections (1) to (3) mirror the existing provision for the All Work Test.

    Subsection (1) provides for the "Personal Capability Assessment" to apply in the same way as the All Work Test.

    Subsection (2): allows the details of the Personal Capability Assessment to be set out in regulations. This follows the existing provision for the All Work Test, but deals with capacity as well as incapacity. The existing regulations for the All Work Test set out measures of the extent of a person's incapacity in specified activities which relate to the ability to work. They cover physical, sensory and mental functions (e.g. walking; sitting; bending and kneeling; hearing; vision; concentration and mood). Assessment is based on a scoring system: claimants who reach a set points threshold are entitled to incapacity benefits, subject to meeting entitlement conditions.

    Subsection (3) gives the power to provide for treating people as incapable of work until they have had a Personal Capability Assessment, or have been classed as capable of work for other reasons (for instance, if they fail to respond to a request for information or evidence). It ensures that incapacity benefits can remain in payment pending a decision on whether a person satisfies the test of incapacity.

New subsections (4) and (5) make new provisions for the Personal Capability Assessment.

    Subsection (4): enables a Personal Capability Assessment to be carried out during the first 28 weeks of incapacity (i.e. while the Own Occupation Test still applies for benefit entitlement purposes).

    Currently the process of assessment cannot begin until the date when the All Work Test applies (usually after 28 weeks of incapacity), and can typically take many weeks to complete. This can mean that decisions on benefit entitlement are delayed, and that, following the introduction of the new capability element, information which would be helpful in preparing for a return to work would not be available when it would be of most value - before people have become detached from the labour market. Enabling the process to begin before week 29 is intended to address these problems.

    Subsection (5) ensures that "the Secretary of State" (normally a Benefits Agency official, acting on the Secretary of State's behalf) may require people who have been found incapable of work in accordance with a Personal Capability Assessment (and who are therefore entitled to incapacity benefits) to undergo a reassessment for the purposes of determining whether they are still incapable of work.

Schedule 8: Part II - Incapacity

Paragraph 23

This paragraph makes amendments to section 171A of the Contributions and Benefits Act, relating to the Personal Capability Assessment provided for in clause 56. The intention of the new assessment process is to produce information about people's capabilities, as well as a decision on their incapacity for work for benefit purposes, and for this information to be used to help them enhance their employment prospects.

Sub-paragraph (2) inserts a new subsection (2A) into section 171A of the Contributions and Benefits Act.

    This new subsection widens the scope of the information or evidence that may be requested from claimants. Subsection (2) of the Act currently provides the power to obtain information and evidence in order to determine whether a person satisfies the test of incapacity for work for purposes of entitlement to benefit. The new Personal Capability Assessment will have a dual function: to determine whether a person satisfies the test for benefit entitlement, and to use information about a person's capabilities gathered during the assessment process to draw up a "capability report" on what they might nevertheless be able to do with appropriate help and support. New subsection (2A) provides for the collection of "information or evidence capable of being used for assisting the person in question to obtain work or improve his prospects of obtaining it" - i.e. information about people's work-related capabilities.

    In practice, much of the information generated during the Personal Capability Assessment process will be equally relevant to the advice whether a person should be treated as incapable of work for benefit purposes, and to the "capability report". However there may be additional areas that may usefully be explored - such as what work-related activities the person might be able to do, and what sort of help they might need to do them.

    Sub-paragraph (3) amends subsection (3) of section 171A of the Contributions and Benefits Act. Subsection (3) at present provides that a person may be called to attend a medical examination where "a question arises as to" whether a person is capable of work. This is now replaced with "where it falls to be determined" whether a person is capable of work, to make it clear that it is not necessary for a medical examination to be preceded by a particular event which has raised a question in the mind of the decision-maker. This amendment supports the provision in clause 56 to clarify the Secretary of State's power to require a reassessment.

    Sub-paragraph (4) inserts a new subsection (5) into section 171A which ensures that all information supplied under section 171A is treated as social security information, and that powers relating to the exchange and disclosure of social security information apply to it. This ensures that information collected during the Personal Capability Assessment which relates to a person's work-related capabilities, as well as information that relates strictly to the question of whether they are technically incapable of work for benefit purposes, can be passed on to personal advisers. It may also be used more generally, for the purpose of enhancing a person's employment prospects and rehabilitation. The relevant powers dealing with information are section 3 of the Social Security Act 1998 and clause 67 of this Bill (see later commentary).

    Paragraph 24 makes a minor change of wording, consequential on the renaming of the All Work Test.

CLAUSES 57-60: INCAPACITY BENEFITS

Incapacity Benefit (IB) is a contributory benefit which provides an income for people who are unable to work because of illness or disability, and have paid a specified amount of National Insurance contributions.

These clauses make a number of changes to the IB legislation. They:

    amend the National Insurance contribution conditions for new claims;

    allow income from occupational and personal pensions to be taken into account when assessing what amount of IB people receive;

    extend entitlement to IB to long-term incapacitated people who claim while aged 16-19 (up to 24 for students) and would currently receive Severe Disablement Allowance.

They also:

    abolish Severe Disablement Allowance for new claimants (clause 80 provides powers to protect the benefit for existing recipients.)

The Government's proposals were published in the consultation document A New Contract for Welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103) in October 1998.

Clause 57: Incapacity Benefit: restriction to recent contributors

Currently, in order to qualify for Incapacity Benefit (IB), people must satisfy the two National Insurance contribution conditions set out in paragraph 2 of Schedule 3 to the Contributions and Benefits Act:

    First, they must have paid either Class1 (employed) or Class2 (self-employed) National Insurance contributions, or a combination of both, on earnings equal to at least 25 times the Lower Earnings Limit (currently £66.00 a week) in any one tax year prior to the benefit claim.

    Second, they must have paid, or been credited with, either Class1 or Class2 National Insurance contributions, or a combination of both, equal to at least 50 times the Lower Earnings Limit in each of the two tax years prior to the benefit year in which they claim IB. A benefit year begins on the first Sunday in January; the tax year starts on 6 April.

Under the Social Security (Credits) Regulations 1975, people can be given credits in a number of circumstances, to help maintain their contribution records. The main effect of credits is to help people qualify for retirement pensions, but they can also count for other benefits. Credits which can count for the purpose of the second contribution condition in IB include credits for weeks of unemployment, incapacity or training, and credits for weeks receiving Invalid Care Allowance or Disability Working Allowance (Disabled Person's Tax Credit from October 1999).

Commentary

This clause amends the entitlement rules for IB, so that benefit is paid only to those who have recently worked and paid National Insurance contributions.

Subsection (2) replaces the first National Insurance contribution condition, by replacing paragraph 2(2)(a) of Schedule 3 to the Contributions and Benefits Act. To qualify for benefit in future, claimants must actually have paid either Class1 or Class2 National Insurance contributions, or a combination of both, on earnings equal to at least 25 times the Lower Earnings Limit in one of the last two tax years before the benefit year to which the claim is made, rather than in any one tax year. This brings IB more into line with contribution-based Jobseeker's Allowance (JSA). The second contribution condition will remain unchanged.

The current provision, in paragraph 2(7) of Schedule 3 to the Contributions and Benefits Act, allows people who do not satisfy the second condition at the time they first claim to make a repeat claim at a later date when they will satisfy it (usually the following January, when the start of a new benefit year triggers a different pair of tax years). Subsection (3) extends this to cover the new first condition. This will ensure that people who, at the point they fall ill or become disabled, have paid sufficient contributions to satisfy the contribution conditions (but only from a future date), are not permanently prevented from qualifying for IB.

For example: a student who works only for a few months after leaving university and then has a serious accident, would have paid contributions in too recent a tax year to qualify for IB-and would not be able to claim the benefit without this provision.

Subsection (4) provides a regulation-making power to modify the normal contribution conditions for people in a specified class. It is intended to use this power to protect people who have paid contributions at some stage but who have not had the opportunity to do so recently because, for example, they have been carrying out caring responsibilities for which they receive Invalid Care Allowance. It will also be used to protect people who were in receipt of IB in the tax year before a new claim; without this protection, they may be unable to re-qualify for benefit after short breaks in entitlement.

Clause 58: Incapacity Benefit: reduction for pension payments

Incapacity Benefit (IB) is usually paid only to people of working age. However, where a person under state pension age (60 for women and 65 for men) has an occupational or personal pension, this currently does not affect entitlement to IB.

This clause provides for IB to be reduced where a claimant has income from an occupational or personal pension above an amount to be specified in regulations. The Government announced in the consultation document "A New Contract for Welfare: SUPPORT FOR DISABLED PEOPLE" their intention that 50% of the excess income over a certain level (proposed as £50) would be deducted from future claims to IB. This would bring IB more into line with contribution-based Jobseeker's Allowance (JSA), where 100% of occupational or personal pension income above £50 per week is deducted from benefit. The Government intend to review this position before the implementation date.

Commentary

The clause makes these provisions by inserting a new section 30DD into the part of the Contributions and Benefits Act that contains the rules for IB.

    The new section 30DD(1) provides a regulation-making power to require income from occupational pensions, personal pensions, and public service pensions, in excess of a prescribed amount, to be deducted when assessing IB. The relevant types of "pension payment" are defined in section 30DD(3) and(4).

    The new section 30DD(2)(a) provides a regulation-making power to specify the level above which income should be taken into account, and how much of the excess income should be deducted (i.e. 50% of it).

    The new section 30DD(2)(b) allows exemptions to be made. For example, the intention is to use this power to disregard payments where the pension payments are in connection with the death of a member of a scheme, or where an occupational pension scheme is in deficit or has insufficient resources to pay the full pension.

    The new section 30DD(2)(c) gives the power to make regulations to assume a notional income in cases where claimants deliberately choose not to take a pension payment in order to increase or maximise their benefit. The intention is to make similar regulations to those already in place for other benefits, including Income Support and Jobseeker's Allowance. It will allow the DSS to take into account the amount of pension income which the claimant deferred. In the case of personal pensions, the regulations prevent any notional income being taken into account before the person is aged 60. They also provide for notional income to be assessed on the basis of information supplied by the pension provider, using tables supplied by the Government Actuary's Department The amount would have to be greater than £50 a week before it would affect IB.

    The new section 30DD(2)(d) provides the power to apportion pension payments into weekly payments. For example, this will enable monthly pension payments to be converted into weekly amounts so that they can be deducted from IB on a weekly basis.

    The new section 30DD(3) provides the power to prescribe other types of pension, or similar, income for which a deduction may be made (as is the case for JSA). The Government intend to use the power to prescribe that permanent health insurance payments should be deducted from future IB claims. This would apply to those permanent health insurance schemes that are arranged by employers to provide for employees, where the contract of employment has ended. It would not apply to schemes used to fund normal occupational sick pay. In the same way as for occupational and personal pensions, the first £50 a week would be totally disregarded and 50% of the remainder deducted from future IB.

    The power in new section 30DD(3)(c) to specify other payments would enable income to be taken into account if new products are developed which provide similar income to occupational and personal pensions or permanent health insurance. The new section 30DD(4) provides the definition of occupational pensions, personal pensions and public service pensions to be taken into account, when assessing IB. These pensions are defined in the Pension Schemes Act 1993 and are already used for JSA.

The Bill provides (at Part II of Schedule 8) for any regulations concerning the definition of pension payments to be subject to affirmative resolution by both Houses of Parliament. That is to say, the regulations must be approved by Parliament before coming into force. This is in line with the procedures for JSA.

Part II of Schedule 8 makes some minor amendments to existing legislation as a result of the Bill's provisions for IB.

Clause 59: Incapacity benefit: persons incapacitated in youth

This clause allows a new category of people to claim Incapacity Benefit (IB). They are those people aged between 16 and 19 (or 24 for students - see below) who would currently claim and receive Severe Disablement Allowance (SDA). Clause 60 of this Bill abolishes SDA for new claimants.

Subsection (1) amends the entitlement conditions for IB set out in section 30A of the Contributions and Benefits Act, and provides that this group may receive IB without meeting the contribution conditions.

Subsections (2) and (4) make consequential amendments.

Subsection (3) inserts a new subsection (2A) into section 30A of the Contributions and Benefits Act.

    To be entitled to IB without having satisfied the contribution conditions, a person must have become incapable of work before the age of 20 (or 25 in certain circumstances), must satisfy the conditions of residence or presence in Great Britain, and must not be in full-time education. Subsection (3)(c) explains that these people must also have been continuously incapable of work for at least 196 days (28 weeks) before benefit can be paid. This is intended to ensure that the benefit is correctly targeted at those with long-term incapacity for work.

    Subsection (2A)(b) gives a regulation-making power to extend the cut-off age from 20 to 25 in certain circumstances. It is intended to use this power to cover students taking courses that lead to a degree or a diploma of higher education, or courses of an equivalent standard. Those in vocational or occupational training will also be included. The qualifying conditions for students will be that:

    they must have started the course before their 20th birthday; and that

    they finished their course no earlier than in one of the last two complete tax years before the year in which they claim benefit (the tax year starts on 6 April). So, for example, if their course finishes in June 2005, they will be able to claim IB until December 2008 (so long as they are still under 25).

    The inserted subsection (2A)(d) gives regulation-making powers to define the residence and presence conditions. The intention is to use this power to require claimants to have been ordinarily resident or present in Great Britain for a total of at least 26 weeks in the year up to the date of entitlement.

Subsection (5) inserts a new subsection (6) into section 30A of the Contributions and Benefits Act. The intention is to use this power to define "full-time education" as applying only to people aged 16-18, and to provide that, in order to qualify for benefit, they must spend less than 21 hours a week in education (excluding any time spent on a course not normally taken by a non-disabled student).

Once a person has qualified for IB under these new rules they may re-claim benefit after the age of 20, following a break in claiming, if the new claim "links" with the previous period of entitlement to IB. For claims to link, the break between benefit claims must not exceed 8 weeks. For those who leave benefit because of starting work the linking period is extended to 52 weeks under the Welfare to Work Regulations 1998.

Clause 60: Abolition of Severe Disablement Allowance;

This clause, and Part IV of Schedule 13, abolishes Severe Disablement Allowance (SDA), by repealing sections 68 and 69 of the Contributions and Benefits Act.

SDA is a non-contributory, non means-tested benefit, paid to people who cannot work because of illness or disability, and who have been unable to pay sufficient National Insurance contributions to qualify for Incapacity Benefit (IB). For people who become incapable of work before the age of 20, the qualifying test of "incapacity" is the same for SDA as for IB-but those aged 20 and over must additionally be assessed by a doctor as "80% disabled".

Approximately 70% of SDA recipients also claim Income Support to top up their income, and therefore see no financial gain from claiming the benefit. This is because SDA is paid at a lower rate, and is always deducted pound for pound when calculating the amount of Income Support payable.

Part IV of Schedule 13 makes the necessary consequential amendments and repeals for the abolition of SDA.

Clause 80 provides a regulation-making power to make transitional provisions-which will be used to protect existing recipients. In A new contract for welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103), the Government said that those recipients aged 20 or above at the point of change would continue to get the benefit.

The Government intends to make regulations that will automatically transfer those entitled to SDA, who are under the age of 20 at the time the changes are introduced, on to long-term Incapacity Benefit a year later. This will give this group of people access to long-term IB at the same time as those who became entitled to short-term IB under the new entitlement conditions introduced by clause 59 in this Bill.

CLAUSES 61-63: DISABILITY BENEFITS

Clauses 61 and 62 make three changes to disability benefits. They:

    introduce regulation-making powers for Attendance Allowance;

    amend the terminology relating to awards made for an indefinite period; and

    extend entitlement to the higher rate mobility component of Disability Living Allowance to 3-and 4-year-old severely disabled children with serious mobility problems.

Background

These proposals were put forward in the consultation paper A new contract for welfare: SUPPORT FOR DISABLED PEOPLE (Cm 4103), published in October 1998.

The consultation paper also proposed the introduction of a "Disability Income Guarantee" to provide additional help for disabled people aged under 60 with the greatest needs and lowest incomes. This measure does not require primary legislation.

Disability Living Allowance (DLA) is a benefit to help with the extra costs of disability. It has two components:

    the care component, which has three rates of payment and is available for those who become disabled, need care and attention, and claim the benefit below the age of 65; and

    the mobility component, which has two rates of payment and is available for those who become disabled, have serious problems with their mobility and orientation, and claim the benefit between the ages of 5 and 65. The higher rate mobility component is paid to those whose mobility is very seriously restricted; the lower rate is for those who can walk, but need guidance or supervision.

Although the main conditions of entitlement are set out in primary legislation, there are regulation-making powers which enable the circumstances to be prescribed in which a person is taken to satisfy or not satisfy the conditions of entitlement.

Attendance Allowance (AA) is a benefit paid towards the extra costs of people who are so disabled that they need care and attention from another person, and who become disabled, or claim the benefit, after the age of 65. The conditions of entitlement and the circumstances in which a person qualifies for AA are currently set out in primary legislation. There are two rates of payment: a lower rate for those who need care either by day or night, and a higher rate for those needing both.

Both DLA and AA are non-contributory, non-means-tested benefits, which are paid tax-free. Awards may be for a fixed or indefinite period.

Commentary on clauses

Clause 61: Attendance Allowance

Regulation-making powers

    Currently, the rules that specify the conditions of entitlement and the circumstances in which a person qualifies for Attendance Allowance (AA), are set out in primary legislation, in the Contributions and Benefits Act (sections 64(2) and 64(3)). The present lack of regulation-making powers in AA means, for example, that when proposed changes apply to both AA and Disability Living Allowance (DLA), which are very closely related benefits, it is not possible to introduce the changes simultaneously through regulations.

    Subsection (1) introduces a regulation-making power for AA similar to the power to make regulations for DLA. It inserts a new section 64(4) into the Contributions and Benefits Act, to create a power to prescribe circumstances in which the AA night attendance or day attendance conditions are, or are not, to be taken as met.

    It is intended that the regulations would be used when the conditions of entitlement to AA needed to be amended or clarified: for example, if a judicial decision departed significantly from the policy intention.

Attendance Allowance for the terminally ill

AA can be awarded, and special rules applied, in respect of people who are terminally ill. Section 66 (1) of the Contributions and Benefits Act refers to entitlement "for the remainder of his life". This can give the mistaken impression that entitlement under the special rules for people who are terminally ill can never be changed, even if their prognosis improves. The definition of "terminally ill" is in section 66(2)(a), and this Bill does not seek to change it.

Subsection (2) amends sections 66(1)(a) and (b) of the Act to make it clear that entitlement to AA under the special rules for terminally ill people only applies during the period in which a person is classed as "terminally ill". Clause 62 makes a similar amendment to awards of DLA "for life"

Clause 62: Disability Living Allowance

Awards made "for life"

Section 71(3) of the Contributions and Benefits Act permits awards of Disability Living Allowance (DLA) to be made "for life". Life awards are made where it seem likely that a person's entitlement to benefit will continue indefinitely. This has led to misconceptions: many people with a life award believe that the benefit will continue even if they are no longer entitled to it. However, these life awards, like all other awards, can be reviewed and altered when there are grounds for doing so, under the powers in sections 30 and 35 of the Administration Act.

Subsections (1) and (2) remove the reference to awards for life in section 71(3) of the Act, and make it clear that DLA may be awarded either for fixed periods or for indefinite periods, subject to review-but that entitlement only applies while the person satisfies the conditions of entitlement. Clause 61 makes similar provision for awards of Attendance Allowance for the terminally ill.

Entitlement to the higher-rate mobility component of DLA

The rules for entitlement to the higher rate mobility component of DLA are in section 73 of the Contributions and Benefits Act. Currently, under section 73(1), children must reach the age of 5 before they can become eligible.

Subsection (3) extends eligibility to the higher rate mobility component to severely disabled 3 and 4 year-olds, in recognition that they can encounter serious mobility problems. The rules governing eligibility to the lower rate mobility component will not be affected, and this will continue to be available to children on reaching the age of 5.

The subsection inserts a new section 73(1A) in the Contributions and Benefits Act, to provide for children aged 3 and over to qualify for the higher rate mobility component if they satisfy the eligibility requirements, and to draw a distinction on grounds of age between eligibility between the higher and lower rates of the mobility component.

Subsection (4) confirms that the extended eligibility does not affect awards made before the date when subsection (3) comes into force.

 
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Prepared: 24 May 1999