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Page 66, line 37, after (“payment") insert (“exceeding the level of the Disability Income Guarantee")

The noble Lord said: My Lords, the position regarding my amendments to Clause 59 is the same as for Clause 58. I am strongly opposed in principle to the clause because its provisions would devastate many severely disabled people who have saved via an occupational pension.

The Government are making an extraordinary proposal which provides, for the first time, means testing for a major long-term contributory benefit. The importance of that should never be underestimated. It raises questions about the future of contributory benefits. Are the Government moving away from them? The same arguments for hitting disabled people claiming incapacity benefit and having an occupational pension can also be used against the retirement pension. What will happen in future if this principle is accepted?

Means testing breaches the moral contract between the Government and the people. None of those people who have paid national insurance contributions,

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perhaps for 20 or 30 years, will have had any idea that if they became disabled, they would be hit as hard as they will be under this clause.

The clause provides that anyone claiming incapacity benefit who has an occupational pension of over £50 shall lose a stunning 50 pence in every pound for every additional pound over £50. That is a stunning figure by any standards. To start penalising severely disabled people so drastically because they have such a small pension would be remarkable for any government. For a Labour Government, historically committed to helping the poor, that is amazing. I know that the figure of £50 is not in the Bill. The specific figure will be in regulations. However, the Government's thinking was clearly betrayed when they put the figure in the Explanatory Notes to the Bill.

Ministers have indicated that they will reconsider that figure. However, I must tell them that any paltry increase would not be acceptable to me nor, I believe, to the House as a whole. It certainly would not be acceptable to the 500 disability organisations which have unanimously condemned the proposal.

It is bad enough to start cutting incapacity benefit at this low level of pension. It is equally unfair that the cut should be at the penal rate of 50 pence in every pound. As incapacity benefit is already taxed at 23 per cent, this new imposition would mean that the incapacity benefit of many future disabled people would be at the marginal rate of 73 per cent. The top rate for millionaires is 40 per cent. Where is the sense in that? Where is the justice and the reason?

Ministers are implying that incapacity benefit recipients are well off. I do not like using figures because I am not good at them, but I must impose a few on the House. The Government intend to start cutting IB for someone with an occupational pension as low as £51 per week. Severely disabled people, with an incapacity benefit and a £51 pension would have a total income of just £117.75 per week, or £6,123 per annum. That is only 37 per cent of average income and just 28 per cent of average male earnings. These people are not, by any stretch of the imagination, well off. They are also too severely disabled to work to improve their income. They are nailed to poverty. By definition, they are incapacitated, and too incapacitated to work.

The Government's proposal is that all incapacity benefits should be withdrawn when a person has a pension of £181.77 per week; that is £9,452 per annum. That is 58 per cent of average income and 43 per cent of average earnings. All I can say is that an income of £9,500 is not a wealthy one.

The Government seek to justify their proposals by claiming that there is double provision of pension and incapacity benefit; that very few people used to have occupational pensions, whereas now many people have them. That is the Government's case, or part of it. However, that has already been taken account of by the previous Tory government who removed the earnings-related element of the former invalidity benefit when it became incapacity benefit. The Tory Government did that precisely because of double provision, so it is already dealt with. The deduction is

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already made. This Government are going on with a further deduction as if the previous government had done nothing about it. It is a duplication of effort. In fact it is double jeopardy for disabled people and I cannot see for the life of me how that can be justified.

If the Government wish to remove incapacity benefit from those who make their own provision with savings and pension, then they should also remove the requirement to pay the portion of contributions that pays for incapacity benefit. That is logical common sense. Not only is the principle wrong; so is the practice proposed by the Government.

In the spirit of compromise which I mentioned a moment ago, I want to propose some fairer figures. Instead of the Government's proposal of penalising people with a £51 pension, I suggest in my amendment that the reduction in incapacity benefit should not begin until a person has a pension of £128 a week. That is the level of the disability income guarantee and that is an amount fixed by the Government. It is a realistic figure. By relating the level to the guarantee and placing this in the Bill it indexes the level and ensures that it will not decline in real terms over time, and that is very important. I hope the Government will be able to accept that.

The 50p in the pound rate of deduction is far too high. I know that there are all sorts of social security tapers, but the significant factor about incapacity benefit is that people have contributed in order to receive it should the need arise. It is not a means-tested benefit which, by definition, has to be related to overall income. I believe, and I invite the House to believe, that two types of payments--national insurance and occupational pension--should mean two benefits. Again, those are straightforward, reasonable, honest propositions. But, again, if Clause 59 is accepted, the moral concept is totally removed.

If we must have the taper then this figure of 23p in the pound, which is the standard rate of income tax, is a reasonable one. I recognise that if all the provisions of my amendment were accepted the incapacity benefit would not be totally withdrawn until the disabled person had an income of £21,747 per annum. The Government would no doubt object to that and claim that these people would be wealthy. I disagree. They would not be paying the higher rate of tax, which is the usual measure of wealth.

There are two vital points to take into consideration. First of all, most people affected by the Government's proposals will have nothing like this income and most of them will be poor. They are the people that we are concerned about tonight with these amendments.

Secondly, regardless of how high the income of the few may be, all of them have paid their national insurance contributions, in some cases for decades, and they are entitled to the benefit when the need arises. I am labouring that point. I make no apology for it, because it must be fair. If people pay you must keep faith with them and give them what they have earned. In an effort to build some kind of bridge, I commend this amendment to the Government. If it is not accepted by my noble friends and the Government,

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as I have said, in my second amendment I shall invite the House to reject the clause completely. I beg to move.

7.00 p.m.

Lord Rix : My Lords, I regret the extension of means testing to a non means-tested benefit, and I should like to see the Government accept the substantial easement of the new means test proposed by the noble Lord, Lord Ashley--seconded, as it were, by me--but that, I fear, is wishful thinking.

The Government deserve credit for the improvements they have made through this Bill for severely disabled people, and I for one accord that credit. However, beneficial changes inevitably have a price tag attached, and the savings contained in this clause certainly provide the necessary financial leverage.

Noble Lords may wonder why I am taking such an interest in this clause, particularly as the majority of people with severe learning disabilities do not have pensions and therefore will not be adversely affected. The reason for my profound discomfort with the principle that an advance for one group of disabled people must be paid for by a reduction in benefits for another group of disabled people must be quite clear.

The Government seem to have couched this distinction in terms of the deserving and the undeserving disabled, characterising the undeserving--the losers in this clause--as those who are using incapacity benefit to finance early retirement. This I believe is misleading. All those who have passed the all work test for incapacity benefit should be judged to be incapable of work, albeit with a measure of assessment of their future capabilities.

I have heard enough said by Ministers to convince me that some further change is in mind to the means test formula. But once again detail has not been forthcoming. I, like a number of other noble Lords present today, would be satisfied with a change which includes substantially raising the level of the existing disregard and protecting its value over time.

I am therefore led to express my disappointment at the Government's continual procrastination over this clause. If there is a Division on Clause 59, as I believe there will be, I feel unable to lend this clause my wholehearted support. I cannot in all conscience represent the concerns of disabled people generally unless I vote against the clause as it currently stands. Nevertheless, I look forward to hearing more detail on any progress in government thinking from the noble Baroness, Lady Hollis, and I urge her and the Government not to defer such detail to another place.


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