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30 Jun 2009 : Column GC35
Grand Committee
Tuesday, 30 June 2009.
Welfare Reform Bill
Committee (7th Day)
3.30 pm
The Deputy Chairman of Committees (Lord Brougham and Vaux): Good afternoon. If anyone wishes to take their jacket off, they may do so. If there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes.
Clause 14 : Maternity allowance and carer's allowance
Baroness Thomas of Winchester: This amendment would remove Clause 14(1)(b), which abolishes the carer's allowance increase for adult dependants. This benefit is fiendishly complicated. The carer's allowance is called an income maintenance benefit, which can be increased if another adult is financially dependent on the recipient.
The adult dependency increases date back to 1948 when on the whole men were the breadwinners and women were the homemakers, so the increases were mostly paid to men for women. Adult dependency increases-ADIs-are paid at different rates for each benefit. The highest rates are payable with contributory long-term benefits, and the lowest with non-contributory benefits.
It was announced in December 2006 that ADIs in the carer's allowance would be removed for new claims from 2010, aligning the allowance with ADIs in the state pension and other benefits. The reason given in the impact assessment-the Peers' information pack is, sadly, completely silent on this clause-is said to be,
- "an important step in moving towards a simpler benefits system which is easier to understand and operate, and helps reduce error".
It is also thought to be outdated as many couples have their own incomes. However, many carers will receive £30.20 a week less in benefit income than they would under the existing rules. At present, around 17,400 carers receive an ADI, and there are an estimated 2,400 new claims each year, including an award of an ADI.
We are assured that income support or pension credit will ensure that most carers do not lose out. However, the impact assessment, under the little heading "Risk of Negative Impact", says:
"Any negative impact can be mitigated through ensuring adequate information in the run up to the change and promoting awareness of Income Support/Pension Credit. This would be consistent with the Government's commitment to advice services".
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Are we quite sure that this will be adequate? I should be glad for some reassurances from the Minister. Does he envisage any circumstances in which someone could be worse off when this part of the Bill takes effect? I beg to move.
Lord Skelmersdale: My Amendment 125, like Amendment 124 in the name of the noble Baroness, Lady Thomas, refers to the removal of adult dependency increases to the state pension from 2010 to 2020. I understand that the rationale behind the Bill getting rid of these increases is not solely about saving money but about adapting payments to reflect changes in family patterns since the payments were introduced in 1948.
Amendment 125 would not reverse the change made by the Bill, but it is designed to probe the transitional period, although the noble Baroness has already posed some of the questions that I might have thought to ask. I accept that the plan is not to make any new payments after April 2010, and that existing awards will not be ended until 2020, which ought to be ample time for existing awards to run their course. From that perspective, it is logical to be able to bring the scheme to a close before 2020 if no existing families are left on it. However, my honourable friend in another place posed two questions to which the Government did not really give any enlightening answer, so I shall re-ask them in this House, and I hope that the Minister will be in a better position to elucidate.
I have said before that it would be a rare bird indeed in social security law if some people did not lose out; the challenge is to mitigate that loss or cushion the blow. To that end, what exactly will the Government do to keep claimants informed of the changes and how they will be affected? Although I acknowledge that monetary savings were not the only consideration, there will none the less be savings of up to £17 million in 2014-15. There exists an opportunity to compensate the poorest households, which will lose out under the proposed changes. Has the Minister given any thought to the good uses to which that money could be put?
Baroness Turner of Camden: I am interested in the amendments because I am not certain what Clause 14 means. Do its provisions, one of which the noble Baroness seeks to remove, mean that after the reform in the Bill, carers and pregnant women with adult dependants will qualify for extra benefits only if they pass a means test? My noble friend will know that a lot of us are not very keen on means-testing; we think it has a negative impact on work incentives anyway. I would be grateful if he would let us know whether that is what the clause means, because I gather that it is not very clear-if it were, we would not have the amendments.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government & Department for Work and Pensions (Lord McKenzie of Luton): I thank noble Lords for the amendments and the chance to explain the Government's position. One of the amendments removes the provision to abolish new awards of the adult dependency increase with carer's allowance from 6 April 2010, and to phase out
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The noble Baroness, Lady Thomas, and the noble Lord, Lord Skelmersdale, broadly got right the history of adult dependency increases and where the Government are on the subject. I say straight away to my noble friend Lady Turner that the clause does not mean that carers can access only means-tested benefit. As I shall explain, it removes one component of the existing structure of allowances available to carers.
By way of background, it might help if I explained that our intention to introduce the change was announced in the December 2006 Pre-Budget Report. The Committee will be aware that one of the long-standing aims of my department is to simplify and update the benefits system. Reducing complexity means that people claiming benefits can better understand what support is available and so improve the take-up of benefits. Simplifying the benefit rules also helps to ensure that staff administering those benefits make accurate and prompt payments. We have already legislated to phase out adult dependency increases with state pension between 2010 and 2020. Such increases have never been a feature of jobseeker's allowance, nor are they a feature of the new employment and support allowance, which replaced incapacity benefit for new claims from last October.
I shall address Amendment 124. Removal of the increases from carer's allowance and maternity allowance is the final measure needed to complete that element of benefit simplification and modernisation. We also think that the benefit system should reflect modern society. The concept of adult dependency is becoming increasingly outdated in a society in which partners generally regard themselves as equals rather than as breadwinner and dependant. Around 3,000 awards of carer's allowance a year include an adult dependency increase, and 18,000 carer's allowance awards are in payment, which is about 4 per cent of the total of all awards which include the adult dependency increase. Half the carers who receive the increase are no better off because it reduces the income-related benefit payable to them. The relatively small figures are indicative of the fact that the adult dependency increase is outdated.
It is important to bear in mind, as both the noble Baroness, Lady Thomas, and the noble Lord, Lord Skelmersdale, did, that this change has a 10-year transition period. Although no new awards will be made from April 2010, we will not end existing awards until April 2020 for any customers who continue to meet the conditions of entitlement. The average length of awards is six years and, as a result, entitlement will have ended by 2020 anyway for the vast majority of customers.
Turning specifically to Amendment 125, we are confident that very few people will still be receiving an adult dependency increase in April 2020. However, we will consider how best to notify customers in good time-I say that in response to the noble Lord, Lord Skelmersdale-and we have a period in which to do that. We need to make it clear to them that the increase is being withdrawn and to advise them to claim any alternative benefits to which they may be
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The noble Baroness, Lady Thomas, asked if I could give an assurance that no one would be worse off. I cannot give that assurance; one cannot say that, come 2020, there will not be someone in receipt of the adult dependency increase. However, the number of people in that position will be very few, in our estimate, because of the six-year average of the claim. A proportion of those claimants receive income-related benefits and therefore it is a net nil for them. The strategy to ensure that individuals are informed over the 10-year transition period has yet to be worked through but, as I said, we have time enough to do that.
Baroness Thomas of Winchester: I am grateful to the Minister and to the noble Baroness, Lady Turner, and the noble Lord, Lord Skelmersdale, for joining in the debate, and for the noble Lord's amendment.
I am always happy to give the Minister a chance to clarify what is in the Bill, and simplified benefits are a very good thing. I shall have to read his reply carefully but, in the mean time, I beg leave to withdraw the amendment.
Clause 15 : External provider social loans
Lord Taylor of Holbeach: With this trio of amendments we now come to the subject of the Social Fund. Clause 15 inserts a new section into the Social Security Contributions and Benefits Act 1992, which in turn allows the Secretary of State to make arrangements with external providers to make social loans in place of the present arrangements with the DWP. The Official Opposition welcome the proposals and the interest that the Government express in having advance payments as a way of getting rid of the need for crisis loans to be made in certain circumstances.
My noble friend Lord Skelmersdale and I have tabled these amendments to examine the operation of the new section and to seek assurances from the Minister. He will probably tell me that Amendment 126 is unnecessary because the Government propose not to allow external providers to impose any interest charges on those who receive loans from the Social Fund. They set out that position in another place and I expect the Minister will stick to it here; they do not intend that external providers should charge interest to people who are in need and receive social loans.
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However, the Government are proposing to take powers-although they do not have any intention of using them at present-to enable external organisations to make loans in place of the present arrangements in the DWP. We know that if the powers were to be used, the external organisations would be credit unions and similar organisations. I am happy to acknowledge that these are very worthy organisations, which would be well placed to make such loans. However, should that power be exercised and the credit unions and suchlike be called into action, they will be making loans from a somewhat different position from that of the DWP. I am sure that I do not need to remind noble Lords that such organisations face expenses which they normally defray from interest charged. Indeed, credit unions need to exceed their operating expenses. I therefore hope to use my amendment to ask the Minister for a little more clarity and detail on this, given that we now know that the credit unions and other organisations will not be able to charge interest. In other words, I am asking the familiar old questions: "How will this work?" and "How will the sums add up?".
3.45 pm
Amendments 129 and 130 are very simple and should be read as a pair. They refer to the repayments of external provider social loans. The Bill suggests that regulations may provide for the collection of repayments by the Secretary of State. My amendments suggest that rather than introduce new regulations the Government should make use of existing regulations. That is not a wholly serious proposal, but the point is that at least we know what the existing regulations are. If the Minister could give your Lordships a clearer idea of what the new regulations might be like, I should feel a lot happier withdrawing my amendment. I beg to move.
Lord McKenzie of Luton: I thank the noble Lord, Lord Taylor, for this amendment, which gives me an opportunity, I hope, to give him the reassurance that he anticipated I would seek to do when moving the amendment. I appreciate that, by tabling Amendment 126, he is seeking to put beyond doubt the Government's intention that we would not allow an external provider to charge interest on any social loan made by that external provider. My right honourable and honourable friends in another place have made the Government's position clear on this matter on a number of occasions and I can add to that assurance that our position remains unchanged. We would not permit interest to be charged.
Our intention is to make arrangements with external providers to make social loans. We will not allow them to charge interest, but we realise that there must be a financial incentive to undertake this work. This is why subsection (4) of the new section provides for the Secretary to State to make payments to lenders in respect of the sums required to make loans and payments in respect of the expenses of the lender, which in different circumstances would be covered by interest charges.
Amendments 129 and 130 are about the provision for the repayment of external provider social loans. Specifically, the part of the Bill which these amendments
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While I appreciate that the noble Lord, Lord Taylor, in particular has concerns around the number of regulation-making powers in the Bill-certainly his colleague, the noble Lord, Lord Skelmersdale, has expressed that point of view on a number of occasions-and that these amendments would reduce the number of new sets of regulations, I cannot be sure that we will not need new regulations. I can, however, reassure him that when we have finished considering the details around recovery and decided what regulations should say, we will amend existing regulations rather than introduce new ones, if that proves practical. I hope that that has covered each of the noble Lord's points, but I would be happy to try to answer further, if it has not.
Lord Taylor of Holbeach: I thank the Minister for that response. He has confirmed what was said in another place on this point. Of course, loans are loans and there must be an expectation of repayment, although, as the Minister will understand, there probably is a higher risk of failure to repay with this type of loan than may be the case with others. It would totally defeat the purpose of making these loans if the repayment structure became burdensome on a family or an individual.
Lord McKenzie of Luton: I am not sure I necessarily accept the proposition that there is a higher risk of default for loans made by this route. One of the key points in going down this route is to seek to ensure that, when individuals avail themselves of these facilities, they are provided with support to manage their financial affairs generally. When they need specific support, they are provided not just with a loan and no advice around that. That is one of the key issues that we want to address in using alternative providers. We hope that it will help increase individuals' financial knowledge and their ability to handle their financial affairs generally.
Lord Taylor of Holbeach: I am reassured by what the Minister has just said. It emphasises, though, the need for individual care monitoring to make a success of these welfare reforms. At almost every level at which we have discussed these matters, we know that the relationship between the client and the welfare agencies is the key to success. Given the way the provision is structured, one hopes that it will succeed in doing that. The Minister has said what I expected him to say. I did say that in those circumstances I would beg leave to withdraw the amendment, which is exactly what I now seek to do.
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127: Clause 15, page 18, line 20, leave out "is in receipt of a prescribed benefit" and insert "has an income comprised solely of benefit payments"
Baroness Thomas of Winchester: I shall have a lot more to say on the Social Fund when we reach the next group of amendments; this one is by way of a starter.
Those whose only income is derived from contribution-based benefits are at present not eligible to apply for help from the Social Fund. Contribution-based benefits can be claimed by those who have at least some national insurance contributions. Currently, eligibility for community care grant and for budgeting loans is restricted to people receiving pension credit, income support, income-based or means-tested JSA and income-based ESA. Community care grants do not have to be paid back, while budgeting loans are interest-free loans to help people meet one-off expenses. People with sufficient national insurance contributions have to claim the contribution-based element of benefits whether or not they have any other income or savings. Many people who have claimed contribution-based benefits do not have any other income or savings but are clearly disadvantaged compared to those on income-based or means-tested benefits. This is clearly unfair. Many people in this position face financial hardship and have no option other than to approach loan sharks.
I do not usually cite case studies but on this occasion I will. A citizens advice bureau in Surrey advised a client who was in receipt of incapacity benefit. His circumstances were such that, had it not been for his NI record, he would have been entitled to income-based, means-tested benefits, which give access to the Social Fund. The client had moved into an unfurnished flat which had no cooking facilities or carpets and lacked a fridge. He had asked for a grant or loan from the Social Fund but had been told that he was ineligible because he was receiving incapacity benefit. As a result the client was cooking meals on a camping stove, which is dangerous, and buying take-away meals, which are expensive.
The Minister may say that all the Bill does is to make provision to allow the Social Fund to be delivered by external providers. However, we cannot let pass this opportunity to discuss extending access to the Social Fund as a whole, however it is provided, to other low-income groups-in the case of this amendment, to those whose sole income is contribution-based benefits. I beg to move.
Lord Taylor of Holbeach: The noble Baroness's amendment at first blush appeared to be surprisingly right-wing for an amendment tabled by the Liberal Democrats. Although I do not say that pejoratively, I accept that it is a probing device to question the eligibility of individuals to apply for and receive a loan from an external provider. The proposed idea that such a person would need to derive their income wholly from benefits is too restrictive.
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The point of the Social Fund schemes is to step in as a kind of safety net to provide emergency funds to those who find themselves in a very precarious position-as a lender of last resort, one might say. Plainly, that facility cannot be available to everyone in the country, because it is not, nor should it be, the business of the state to legislate for providers to supply social loans without question. It is for that reason-because people who are in receipt of benefits are already being taken care of by the state, after a fashion, and are therefore owed a particular duty of care by the state-that the Bill allows for categories of persons eligible and the nature of the loan to be prescribed under new Section 140ZA.
The question asked by the noble Baroness, which I echo, is for the Minister to give your Lordships more of a clue as to the kind of person whom the Government consider ought to be eligible for a social loan. What proportion of income should be derived from benefits before a person becomes eligible for a loan? In other words, what benefits will be prescribed under new Section 140ZA(2)(a)?
The point of social loans is to help people out of a precarious situation on a temporary basis, as the term "loan" suggests. The support and advice that they get along with it will be vital, almost regardless of who actually qualifies for a loan, as I said on the previous group of amendments. It is important that people receive financial advice so that they might climb out of the hole that they are in and, I hope, prevent themselves falling back into it. I expect that such advice and support might cost money. If the Government intend to provide that kind of service to the very needy, will it be paid for out of the existing Social Fund budget? If so, will that substantially reduce the amount of money available to Social Fund borrowers and will that in turn have an effect on the stringency of the eligibility criteria?
Lord McKenzie of Luton: I gather from the remarks of the noble Baroness, Lady Thomas, that we are likely to have a broader discussion around the Social Fund on the next amendment, so I shall keep my remarks fairly focused at this stage. It is obviously difficult to comment on individual cases, but in the example that she cited a crisis loan would not necessarily be ruled out, because crisis loans are not linked to or precluded from people who are not on income-related benefits. I do not say that it would have been approved in that case, but it might have been.
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