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Baroness Hollis of Heigham: My Lords, I had hoped to avoid interrupting the noble Lord in the same way that he was courteous enough not to interrupt me. I did not hold out hope. Let me make it very clear. I said that the Secretary of State had made it clear that while he firmly supported the principles he was open to discussion about the details. It was the Secretary of State.
Lord Higgins: My Lords, I do not doubt, after the rebellion which took place, that the Secretary of State was well advised to say something of that sort, but I think we ought to make it absolutely clear--
Baroness Hollis of Heigham: My Lords, this was at Second Reading, well before any discussions or, as the noble Lord prefers to describe it, a revolt in the other place.
Lord Higgins: My Lords, he may have been a little prescient in feeling that perhaps the proposal would not go through quite as easily as he might have supposed, even when he introduced it at Second Reading. Be that as it may, in our view the principle involved here is
wrong. We are very concerned indeed at the way in which the question of entitlement to incapacity benefit is to be reduced because people have been prudent enough to provide for a pension. It seems to us a most extraordinary provision. It is sad that the Government, having failed to introduce radical reforms to curtail public expenditure on welfare, are resorting to this sort of change. It is a matter of broad concern on all sides of the House. We take the view that it is wrong in principle and changing the actual numbers here or there does not alter that point.Similarly, as regards the restriction on incapacity benefit and the length of time during which people have made contributions, we are withdrawing here something to which people have previously been entitled but which is now to be restricted because benefits will only be available if contributions have been made in the immediately previous period. Again we believe that is wrong.
The abolition of severe disablement allowances is a matter on which outside bodies have expressed some dismay. When Mr. Frank Field was asked to look at some of these issues he was told to think the unthinkable. There are those who say that he did so and that that has been the problem as far as Mr. Field is concerned. I would have thought that the abolition of the severe disablement allowance might well have been something which the noble Baroness might also have regarded as unthinkable. She has sought to justify it today, but I think we need to probe the matter very carefully.
All the issues I have mentioned represent a change in attitude on the part of the Government which we cannot support. I believe it is right that we should deal very carefully with them during the later stages of the Bill. As I said at the beginning, this is not one Bill but several Bills rolled into one. We will need adequate time made available to deal with all these matters, to examine them in detail, and to improve the Bill. If need be, as has been much stressed in recent months, we ought to take the opportunity to ask the House of Commons to think again. There is much in this Bill on which the House of Commons will need to think again, and we shall do everything we can to ensure that matters are scrutinised properly and that good sense prevails.
A very difficult task lies ahead of us because of the complexity, scope and extension of the Bill into so many different areas. I believe it is right that we should give every attention to the legislation. Although the noble Baroness sounded very plausible in many respects, we believe--and it is quite clear from outside representations--that there are serious problems with the Bill which need to be put right.
5.10 p.m.
Earl Russell: My Lords, wearing my other hat, one of the skills I have tried to acquire is that of going through a large, unsorted box of loose papers stretching through several centuries and, at a glance, plucking out those which may relate to the few years on which I happen at that moment to be working. Were I try to apply that skill to a few loose leaves torn out of the Bill,
I should be unable to date it with any precision. I think that I would be able to place it as emanating from the Department of Social Security, probably in the 1990s. I do not think that I would be able to tell from anything in the contents of the Bill from which government in the 1990s it had originated. It does not bear on the face of it any clear philosophical mark of its political origin.The noble Lord, Lord Higgins, hit the nail absolutely on the head when he said that this is not a single Bill. It is not even really a collection of small Bills; it is a collection of miscellaneous clauses. So when I set about the task of trying to identify the general principles of the Bill for Second Reading, I could not do so. Even quite late last night I had not succeeded in planning the general outline of a speech. I finally came to the conclusion that the general principle of the Bill is that general principles are not there.
I know that we have had a great many general principles stated. The Minister has stated some about changes in the status of women since Beveridge wrote. She is right about that. I do not see that that bears particularly clearly on the contents of the Bill--except in the case of widows, where I am moving increasingly to the suspicion that the Government, although they have made a good attempt, have nevertheless got it wrong.
I know that the Prime Minister has plenty of principles. But the Prime Minister's principles, like the proverbial flowers that bloom in the spring, are nothing to do with the case. I looked at the Prime Minister's Beveridge Lecture delivered on 18th March last for a guide to the principles which the Prime Minister is trying to apply to this subject. He said first that he was trying to take up,
- "a great challenge; how we make the welfare state popular again".
He has also fallen victim to the first-past-the-post illusion that 43 per cent is a majority. It is not. We should be very careful indeed about forming assessments of political opinion based on the supposition that 43 per cent is a majority. So that is one area where the Prime Minister is tilting at a windmill.
More generally, the Prime Minister has suffered quite badly because either he or, more likely, someone in his office rather a long time ago, had the misfortune to read Charles Murray. Again in the Beveridge Lecture, he said:
- "a welfare state that is just about 'social security' is inadequate. It is passive where we now need it to be active. It encourages dependency where we need to encourage independence, initiative, enterprise for all".
The sentiments are unexceptionable but they are absolutely in the wrong place. That is why I said that they have nothing to do with the case.
Moreover, there is sense in the free market principle that if there is a job it should be incumbent on an employer to make it sufficiently attractive for people to take. The Prime Minister said also that we must have a situation of people having an obligation to take jobs or risk losing benefit. If one sees that as simply a matter of the morals of benefit, I can understand why he said it. But we should think also about the distorting effect on the market of supplying employers with, in effect, a conscripted force of labour which, within the very small limit set by the minimum wage, is bound to take a job whether or not it is sufficiently attractive. That is a particular problem.
- "any citizen of our society should be able to meet their needs for income, housing, health and education".
That sits a little uneasily with a Prime Minister who has perhaps a greater addiction to disentitlement than any other I can remember. He did not even refer to those who had met his contract but to "any citizen". I do not think that he meant it. So the Prime Minister's principles are really nothing to do with the case.
That is most clear in what the Minister said about incapacity benefit being used as a form of unemployment benefit and a form of retirement. My noble kinsman Lord Henley and the noble Viscount, Lord Astor, are not at present in the Chamber. During the passage of the 1994 incapacity Bill, I am sure that they remember churning out almost exactly identical phrases. Those phrases are pure hypothesis. We do not know that that is the reason for the increase in incapacity benefit. If the Minister is to pursue that point, I should like to hear some evidence to justify the hypothesis.
Perhaps I may suggest at least one other hypothesis. The Acheson Report--it repays study--draws attention to the fact that there has been a considerable decrease in mortality but no corresponding decrease in morbidity. Twenty years ago, a great many people who are now receiving incapacity benefit would not have been in work. They would have been dead. It is also a well-known fact that unemployment has a serious effect on health, especially on mental health. If people who
have been unemployed for more than two years are suffering illness, they may be ill because they have been unemployed.The Acheson Report also stresses that benefits are by no means always adequate to maintain health. I shall return to that point in Committee. Many of these people may be ill because they are on benefits which are insufficient to give them adequate nourishment. To use that as evidence that people are trying to fiddle their way out of the labour market--which is the innuendo, even if the Minister did not intend it, left in people's minds when those words are heard--is entirely misleading. Fortunately my noble friend Lord Goodhart and I are able to enjoy a division of labour. My noble friend will be dealing with the pension-splitting section of the Bill. I join in the warm congratulations to the Minister on her part in that. I thank her for her kind words about Lady Seear. We are delighted that the provision is included. If we give it careful scrutiny, it is merely for the purposes of making it work. I am sure that the Minister would expect no less.
I am interested in the provision relating to widows. I agree with the noble Lord, Lord Higgins. It stems from provisions in the European Convention on Human Rights. It is a move towards gender equality, and one must welcome that. One must also welcome the increase in the immediate lump sum bereavement payment. However, there is a question as to whether this is going at too breakneck a speed, and whether it too greatly whittles down the area of choice within marriage.
The widow's parent's allowance will continue only until a child who continues in education is 19. That is very hard on those children with widowed parents attempting to enter higher education. I know painfully well that people cannot usually complete their higher education without a vast amount of help from their parents, or an unacceptable amount of paid work during term time, which interferes with their studies. Therefore, in Committee I shall examine that limitation to age 19 to see whether there is any give for those in higher education.
I am more concerned with the six-months' limitation on the bereavement allowance. This is purely a provision of gender equality. I respect the principle behind it; namely, that if the two sexes claim equality, in the case of bereavement both must be prepared actively to seek work. But the provision contemplates a very big cultural change. That change has already taken place in some households; in others it is nowhere near beginning. We on these Benches feel strongly that it is a vital principle that couples should have a choice as to whether they both go out to work or whether one of them is the specialist carer--and not necessarily the woman.
There is a tendency to restrict choice. Also, if such a change is to be brought in, it must be done in such a way that those people who begin their pension provision reasonably early in life should do so knowing that this is the position that their widow or widower will be in. There is a real problem in regard to what lawyers term "legitimate expectation". So if the Minister intended to introduce such change, it should have been
introduced with a very much longer time lag before its commencement. If it were to come into force in 2020, then it would be theoretically justifiable. As it is, the provision appears draconian and a cultural imposition.On the question of the single gateway, there is a compulsory interview--I agree with the Minister that it is merely an interview--for all those who move on to benefit, with provision for loss of benefit if they do not attend. Here there are two conflicting, valid principles. On the one hand, it is a good principle that people should not be paid benefit for doing nothing. We on these Benches accept that. But it is also a valid principle that, in the words of the Prime Minister in his Beveridge Lecture, anyone has an entitlement to basic physical support. Here, those principles clearly conflict. We on these Benches will not vote against the principle of the single gateway. However, we have severe misgivings about its practicalities. We have misgivings about who will be exempted from the interview; the travel requirements; such people as illiterates, who may not know that they have been summoned to attend; and the qualities of those who will conduct the interview.
I am sure that the Minister will never forget the BIP--a story from which she emerges with so much credit. I must rely on her to ensure that those who conduct the gateway interviews do not include unqualified people who may make the kinds of mistakes that were made in the course of the BIP. I am sure I need say no more.
The Minister will need to think about how far all these extra requirements are compatible with the requirements of the change programme, by which the running costs of the Department of Social Security were to be reduced by 25 per cent. Mr. Peter Lilley said that that filled him with despair. The more I look back on that statement, the more I think how right he was. I hope that the Government may see grounds for agreeing with him.
Turning to Clause 56, I am in sympathy with the changes to the all-work test that the Government propose. But I wonder whether the Government have appreciated quite what a bad test it is. That was the worst element of the 1994 Act. I am sure that the Minister is familiar with the CAB report, An Unfit Test. Perhaps I may take one example from the report and use it as a proxy. It is the example of someone who had a severed tendon in his hand, with nerve damage as well. He was found to be fully capable of work because no descriptor takes into account the length of time needed to complete tasks needing the use of both hands. It is not an objective test. It is objective only in those matters that the compilers of the test happen to have thought of. Being human beings, they are subjective.
The Minister will also be familiar with DSS Research Report No. 86, the study tracking those who had left incapacity benefit, both voluntarily and involuntarily. It found absolutely no correlation between their test scores and their prospects of future employment. That is a worrying finding. I should like to hear from the Minister, in replying, that she is prepared to do a great deal more to change the all-work test than merely the points that she has set out. There cannot really be an all-work test, because there is no single activity known as work.
Clause 57 deals with the restriction of incapacity benefit to those who have paid recent contributions. I have said a little on that already. There is more wrong with it. It is geographically discriminatory. In certain areas of the country people have no reasonable prospect as they get older of having been able to do work within the two years prior to a claim. The ward next door to my own is a case in point; and there are plenty of such areas in the north-east. So this clause will penalise people for where they live. That is unfair. It will penalise women extremely severely, mainly through an interaction with the exclusion of those who are working but who are cut off by the lower earnings limit for national insurance; or people who are doing several part-time jobs, each of them below the lower earnings limit. Many people who are in that position have made serious attempts to work and should not be penalised for not trying. The provision will also work extremely harshly for carers, as the noble Baroness, Lady Pitkeathley, may be about to tell us. I shall listen carefully to her remarks.
Clause 58 deals with pension payments. I understand the theory of what the Government are trying to do. But the road to hell is paved with good intentions. I have heard the Minister complain many times about the number of perverse incentives in the benefits system. She is here creating another. She is creating an incentive not to save. However good the theory, it will not do. If the practical effect of introducing the clause is damaging, even if the theory is perfect, it still should not be done.
There is a great deal more that needs to be looked at: for example, Clause 64, on compulsory production of national insurance numbers for obtaining child benefit. I have spoken to the Minister before about the difficulty many people have in getting national insurance numbers. I shall come back to that.
My final point is on Clause 77 which allows authorisation of forward expenditure by statutory instrument. Because of the revolutionary tendencies of those who manage business in another place, this fell victim to the guillotine, so it received less scrutiny than many people would otherwise have wished. It concerns a number of the committee chairmen in another place, not least my honourable friend Mr Kirkwood, chairman of the Social Security Select Committee. I understand what the Government are trying to do and why they are trying to do it, but we shall want to examine that carefully in Committee, and a great deal else.
5.30 p.m.
The Lord Bishop of Bradford: My Lords, I wish to make a modest contribution to the debate which, as one would expect, will be of a different order. I am not competent to discuss the details of the Bill and I have no party political flag to fly. I wish to speak on behalf of quite a number of clergy and others who spend a great deal of their time living among people who are poor and for whom we hope the provisions of the Bill will provide some relief.
I was greatly interested to hear the Minister talk about the ethics of Beveridge. I believe I quote her correctly. People are concerned to know what are the ethics and principles behind the Bill and what is the vision of the society which the Bill seeks to help to create. People are frequently bemused by the mass, the torrent of words which are written and pour out in debate. But a vision is something which many more people can come to terms with. What are we designing the Bill for? What do we hope to achieve? How can the people who need it most understand and respond to it?
Christians are called to pay particular attention to the needs and circumstances of the poorest people in society. That is a view shared by people of other faiths and no faith at all. It means a great deal more than helping individuals in their need. It means a great deal more than creating charitable organisations. It means providing a fair and accessible system for the delivery of state provision of welfare.
I underline the word "accessible". The comment that is made time and time again to those of us who are not expert in these matters but who talk to people most affected is: "We simply do not understand. How do we find out how we can get help?" It is not merely clergy, not merely people of that order. I think I am right in saying that in 1997-98 the citizens' advice bureaux had something like 6.2 million problems referred to them, 2 million of which concerned the social security system. It is a strange community in which poor people who are frequently disadvantaged and unable to speak for themselves have to go to volunteer experts in order to understand the provision which is designed to help them most.
I hope we shall have a vision and that in the vision and principles we will have something that will give us encouragement in that direction. It may be a foolish thing to ask, but perhaps a bishop is the best person to ask foolish things in your Lordships' House--a fool for Christ's sake. One of the great learning processes we have been through in the diocese of Bradford was called "powerful whispers". We went to four of the most deprived areas in Bradford and Keighley, took the so-called great and the good of the area in politics and public life, including the bishop, and made them sit down for two hours without speaking a word, in order to listen to people who lived in those deprived areas saying: "This is what it's like to live here". Those people needed a lot of help to do that; they are not used to standing up and speaking for themselves. I ask the Minister this: who has sat down and listened to such people when creating a vision and seeking to construct the Bill? It is a foolish thing to ask, but we are dealing not with statistics and concepts such as the poor and the unemployed; we are dealing with human beings.
I may not understand a lot of what happens in this debate, but I understand a little about the human beings who will be affected. It is easy to do good for other people. I ask: at what stage has there been a real listening to people who are most affected? I hope it has been good and I shall be greatly encouraged if so.
Speaking of the stakeholder pension, the Minister said, "It will be simpler, easy to understand and to compare". I cannot comment about stakeholder
pensions, but if that statement proves to be true of the Bill and the welfare provision in this country for ordinary people, perhaps I may be the first through the Lobby to exercise my vote as "Content".I hope that in this vision we shall have a strong word about mutuality. I wish to quote briefly from a superb report produced by the Roman Catholic Bishops' Conference. It is called The Common Good:
- "The common good ... implies that every individual, no matter how high or low, has a duty to share in promoting the welfare of the community as well as the right to benefit from that welfare".
One way of understanding social inclusion, though it may not be the technical way, is to enable the people who are the poorest and most deprived to feel that they have something to contribute and to say to the rest of us: "We have something to contribute". We live in a community which is mutually supportive. That is why, when the noble Lord, Lord Higgins, spoke about the undermining of the contributory principle and the problems with means testing, I began to nod. People to whom I have spoken may not have used precisely those terms, but they said: "We are very concerned about what we think is the disappearance of the contributory principle and what we perceive, rightly or wrongly, to be the increase in means testing". That view is not only expressed here, it is expressed in other words elsewhere.
It is quite clear that modifications have to take place. Fifty years or more is a long time. I hope that the Government will be kind enough to paint a vision which people can understand, even if words are not their normal currency. I hope that there will be clearly underlined principles, not financial principles but the moral and ethical principles to which the Minister referred. I hope that in that vision we shall have at least one or two of those elements: a society where members feel and take responsibility for each other, from the poorest to the richest, and in which all feel they have something to contribute. I refer to a system that is based on the contributory principle in which the dignity of each human being is preserved and enhanced; a system with clear and easily applicable rules that are generally felt to be fair; and a system devised by those who have genuinely listened to the poorest and most vulnerable members of society which can be understood by those people.
It is foolish to pretend--I do not do so for one moment--that the detailed provisions of the Bill can be dispensed with; they are essential, but unless we have a vision that fires us, wins our confidence and encourages us as we deal with the detailed provisions of the Bill, I fear that we shall finish up with a bonfire of clauses to which no doubt the noble Earl, Lord Russell, will be glad to add the flames.
5.41 p.m.
Baroness Pitkeathley: My Lords, in preparing for today's debate I have been much struck by the similarities in attitude towards this Bill and the House of Lords reform Bill which has just completed its Committee stage in your Lordships' House. In the short time that I have been here I have never met anyone inside or outside this House who does not agree that reform is necessary. On this there appears to be universal agreement. The problems appear to arise only when we go on to talk about the form that it should take. Similarly, in all my years as a campaigner I have never met anyone who says that the benefits system does not need reform. Usually, we can even agree the reasons for the reform, which would include: that the welfare state is not delivering enough to those in greatest need, and that the benefits system has not kept pace with the changes in society since the system was introduced.
The example that I know best is that of carers, who were not even recognised in the benefits system until the mid-1970s, and married women were granted invalid care allowance only as recently as 1986. When, however, we try to agree the shape of the reform we run into problems. Too frequently opposition to reform concentrates only on defending the status quo. Again, the similarities between this Bill and that relating to reform of your Lordships' House are quite striking.
I declare at the outset my belief that we must take the same line on welfare reform as the Government have taken on reform of this House. A start must be made, but we must bear in mind that this Bill represents just that, a start. This is a key building block in the development of a welfare system which will meet the needs of our society, especially those who are most disadvantaged, for the next 50 years or so. We cannot make those changes overnight or even--as is also the case with reform of your Lordships' House--agree the final shape of those changes. But if we wait until we achieve consensus on those matters we shall never agree the reforms which everyone accepts are necessary. We shall be left with a welfare system that does not provide adequately for those most in need and continues to work on an outdated set of assumptions.
We know what those assumptions are: that some people work and some do not; that all those who work are engaged in the same job until they reach retirement age; that men die shortly after retirement age (one year after retirement in 1945); and that few people with disabilities live very long, never live independently and are rarely in paid employment. We must establish a new set of principles by which welfare benefits are provided; and, above all, we must make a start.
I turn now to the Bill itself and will comment only on some parts of it. The first part of the Bill is concerned with pensions. I must record my delight that the proposals for second state pensions are to be extended to carers. The recognition that caring affects families not only practically and emotionally but also financially is welcome and long overdue. Taken together with the other proposals contained in the national carers strategy, it will give carers not only increased financial security but also what they most deserve: recognition by society of the contribution that they make willingly and with love.
I also welcome the proposals for a single gateway. Too many benefit recipients have to deal with a confusing array of different agencies with little attention paid to them as individuals. A single gateway will enable them to be treated as individuals to ensure that the benefit they claim is the right one and, drawing on the evidence of the New Deal, give them information about job opportunities. But there must be a word of warning here. A single gateway will work well for disabled people and carers only if it is tailored to individual needs and takes account of individual variations. To try to push people into a pre-set mould because that suits someone's convenience--assuming that everybody can work because the majority wish to do so--will cause distress and result in injustice. Those who administer a single gateway must be selected for their sensitivity and properly trained so that they are aware, for example, of the special problems of those with mental health difficulties and so on. This must be a priority if the single gateway together with the individual interviews on offer are to be seen as a helping hand to the individual--I am sure that the Government wish them to be helpful and not negative--and not as a barrier to be overcome.
Much has been said on the subject of disability benefits. It is vital that we take note of those who are closely concerned and in touch with disabled people. My colleagues in the disability movement are united in agreeing that there are many good things in the Bill. It is very important to remember that rather than to concentrate on the very few issues which divide us. The Bill puts £2 billion more into the system in the lifetime of this Parliament. That includes more money for low income disabled people with severe care needs and up to £26 a week more for those severely disabled early in life.
My colleagues in Contact a Family who represent parent carers are naturally delighted that DLA will be extended to three and four year-olds so that they will be able to receive up to £37 a week more. This group of carers has frequently been ignored in the past and this proposal is particularly welcome. The Government may wish further to recognise the needs of this particular group by reviewing how the exceptional mobility costs of children can be met, for example when they need to visit hospitals and health clinics and cannot use public transport. More help is also to be made available to those with disabilities who are in paid employment. This, too, has been welcomed by campaigning groups.
As to the proposed changes to incapacity benefit, we shall no doubt have many opportunities to explore these in detail at later stages of the Bill. For the moment, I simply remind your Lordships of the original purpose of invalidity benefit, which all campaigners welcomed when it was introduced. It was to be a benefit which compensated those who gave up work because of long-term illness. We all know that that is not what it is now. Although no doubt we will disagree as to the reasons for it, we know that IB has become an alternative to long-term employment or early retirement. There has been a threefold increase in the numbers who claim IB over the past 20 years which cannot be explained simply by the increase in the number of people with disabilities living longer.
There is absolutely no question of fraud in these cases, as I am sure your Lordships will acknowledge. Disabled people do not defraud the system, as the benefit integrity project very clearly demonstrated. It is simply that the benefit is now being used for a purpose for which it was never intended. I understand the view of the Government that this cannot be ignored and must be addressed. We must remember that absolutely no existing claimants will be affected. Any changes which the Bill introduces will apply to new claimants only. There will be time before the Act comes into operation for expectations to be changed and for a major information campaign to be mounted. I hope that the Minister will be able to commit the Government to such a campaign and also help disability groups with their own information campaigns, which have always proved so vital and effective. Moreover, we must learn from this experience of IB about the kind of benefit which is effective for people with long-term illnesses and ensure that that learning is fed into the next stages of welfare reform.
There has been much discussion of the contributory principle in relation to IB. Some have even suggested that this is the first time that the contributory principle has been breached. One wonders whether they have given thought to the question of contributions to the fees required for residential and nursing home care for the elderly. They may have paid their national insurance contributions but they certainly do not have a right to free care. Your Lordships will remember that those changes were made by stealth, not brought to this House in a Bill. It took this Government to set up a Royal Commission to redress that problem. We still await the Government's response to the Royal Commission. I very much hope that it will be soon and I very much hope that they will take the needs of older people in that regard firmly into account.
The use of IB for a purpose for which it was never intended makes the case for re-establishing the link between recent work and benefit. I am aware that claimants would have to have made contributions for only 12 weeks during the past two tax years, but I very much hope that the particular case of carers can be taken into account during interviews since they are a group of people who often have difficulty in maintaining regular work simply because of their caring responsibilities. I believe that I understood the Minister to say that the claiming of ICA in the previous two years could be seen
as a substitute for contributions, certainly for some groups. Perhaps she will clarify that. I hope that the Government will be able to take that line where clearly the claimant has been kept out of work because of caring duties.I agree with the noble Earl, Lord Russell, that we must be concerned about people who work part time and are below the lower earnings limit and those who have several part-time jobs, but each is below the lower earnings limit. These people can never build up a contributory record and therefore can never get on to IB. At present, if they are 80 per cent disabled they can claim the severe disablement allowance. However, what will happen when SDA is abolished? I hope that the Government may find a way to bring such workers, the majority of them women and many of them carers, into the national insurance fold.
Currently, IB disregards the fact that more than half of all claimants now have an occupational pension. This is one of the major changes in our welfare system since it was introduced and the effects of such pensions on income have to be taken into account, however opposed many of us are to means testing. I speak as one who was brought up on the terrible stories my grandmother told me of how the means test operated in the Depression and who as a young social worker in Moss Side, in Manchester, saw the way in which means testing disadvantaged those who needed help most.
I stated clearly that I am emotionally opposed to means testing, but I am beginning to wonder whether in our current society and in some cases the redistribution of income rather than universal provision may better meet the needs of those who, for whatever reason, cannot achieve independence or provide for themselves.
However hard some of us find it--and I do--maybe we have to look at whether it is right that someone who is receiving £10,000 a year in occupational pension receives the same IB as someone with only the state pension. Redistribution of income would surely enable us, as the reform of the system proceeds, to raise the inadequate level of the retirement pensions, which I know would find favour with many of your Lordships.
I very much hope that the Government will be able to make concessions both as regards the threshold at which this happens and the level of pension one may keep before the taper kicks in. The last thing we need is for saving habits to be discouraged. It was encouraging to hear that the Secretary of State is willing to think carefully about this.
In conclusion, we must remember that most of our welfare system has its roots in Beveridge. Time for radical reform is overdue, but radical reform is difficult, as your Lordships know perhaps better than any other group. I hope that we can use the debate and discussion here to address the problems with the Bill, as well as to acknowledge its attributes. Above all, I hope that we shall bear in mind that these proposals are a start, and a start only, at giving us a welfare system which at last reflects not the needs of some society in the past, but the needs of our current society.
5.53 p.m.
Lord Freeman: My Lords, since Beveridge there have been a number of important landmarks in the provision of supplementary pensions. As the Minister said, the enormous growth in occupational pension schemes, particularly in the nationalised industries immediately after the Second World War, was a landmark development. Indeed, the degree of provision now made by the occupational pension schemes rivals that of any industrialised nation in the world. In considering any legislation, we must be careful to ensure that the great advantages of occupational pension schemes are not endangered.
The supplementary earnings-related pension scheme is soon to be replaced and renamed, which is another landmark. Some 10 years ago, we saw the introduction of private pensions, sadly tarnished by mis-selling as a result of incentives placed before the salesmen who sought to persuade people to leave occupational pension schemes. Nevertheless, that was a landmark.
Now we have the stakeholder pension, which is a regulated private pension. It is more flexible and I welcome it. Indeed, there are a number of features in the Bill which should be welcomed. I agreed with the noble Baroness, Lady Pitkeathley, when she spoke of the extension of the second pension to carers. That is right, as is also splitting pensions on divorce. Some three years ago, on behalf of the previous administration in the other place, I welcomed that change and gave a commitment in principle to accept it. I am delighted to see it in the Bill after detailed preparation.
Furthermore, I am sure that your Lordships welcome the annual pension statement--I believe that the right reverend Prelate the Bishop of Bradford will welcome it--providing people who are not familiar with the complexities of pensions with a simple annual statement of their state and private pension entitlements. Although that is a modest measure according to some, in my judgment that is a landmark improvement.
As regards stakeholder pensions, the Bill contains a number of welcome provisions. First, there is a greater proportion of pensions made from private provision. That must be welcome. According to the Green Paper, up to 60 per cent of total pension provision comes from non-state sources. That must be right. Secondly, there is an encouragement for those on modest incomes--that is, from about £9,000 to £20,000 a year--to provide for themselves an additional, supplementary pension. That, too, must be right.
I share with the Minister the belief that there should be no compulsion either on employers or employees in the making of supplementary pension provision. I welcome that. Finally, I welcome the excellent innovation that contributions can be made to a personal pension scheme when one is out of work for up to five years. Again, that is a very important and welcome development.
However, there are a number of general concerns to which I shall wish to return in Committee. I am sure that to some degree they are shared on both sides of the House. First, we must be careful about encouraging, perhaps unwittingly, any unnecessary move from the
benefits provided by what are technically called "defined benefit" schemes but are occupational pension schemes which guarantee a pension related to one's salary--in other words, what the company can afford--to schemes which are technically called "defined contribution", money schemes where one gets out what one puts in. Secondly, during the past 10 years many people unwittingly moved from the protection of generous occupational pension schemes into perhaps the harsher world of money purchase schemes when that was unnecessary. In my concluding remarks, I shall suggest a solution to that problem to which I shall wish to return in Committee.A second general concern is the level and clarity of advice provided to those who are not normally familiar with pension details. I refer to the level of advice available to those who may be inclined to make a contribution to a stakeholder pension. I do not believe that the Government's present proposal, which I understand to be that the operational costs of the stakeholder pension scheme shall be limited to 1 per cent of the value, is acceptable. One per cent of the modest minimum payment of £10 a month, £120 a year, will not buy much advice. We must return to that issue in Committee.
Perhaps I may flag up one major concern, and a possible solution, to which I shall wish to return in Committee. I believe that this is a problem which faces up to 100,000 of those who are employed by small companies in this country. I refer to the situation where small companies which have an occupational pension scheme, perhaps not very generous, may be inclined to consider closing it in the face of the advent of stakeholder pensions. According to the Bill it is compulsory for companies to facilitate their employees to provide a stakeholder pension; it is not a matter of compulsion that the employer should make a contribution.
Sadly, therefore, as I think history shows over the past 50 years, I believe that small companies under pressure, particularly those not necessarily in a very competitive position, might seek to close their occupational pension scheme, cease their contribution, and rely on their employees to provide for their supplementary pension through stakeholder pensions. My calculations indicate that up to 100,000 people might be affected out of the 5 million or so to whom the Minister referred as benefiting potentially from stakeholder pensions.
As the Minister will know, the Association of Consulting Actuaries conducted a survey of 572 smaller companies, employing up to 250 staff. The survey revealed that 12 per cent of those companies indicated that they would close down their occupational pension schemes, and therefore the employees would be worse off. It may seem a matter of detail but it will affect provision for pensions for employees in those smaller companies. I should like to return to that at Committee stage. I believe that there is a solution.
I understand that in a newspaper interview a number of weeks ago the Secretary of State at least held himself open to a favourable consideration of dual membership. Dual membership is a mechanism which would require the agreement of the Inland Revenue. Dual membership
is a provision whereby, if one is employed by a company, one can stay in its occupational pension scheme and top up one's pension provision through stakeholder pensions. I believe that this is an important principle. The reality of life today is that in one's working life one can move from one employment to another. The facility to come in and out of an occupational pension scheme leaving behind the accrued benefit, rather than suffering the penalty of an inadequate transfer value, and having one's own stakeholder pension which is consistent and runs through one's working life--and one can use it as the main provision to top up pension provision when one is in work or self-employed--is a sensible way forward.It requires the co-operation of the Inland Revenue. In retrospect, I should say that the inability of the Inland Revenue to concede dual membership when the last administration of which I was a member introduced personal pensions inevitably led to problems. Mis-selling, of course, was a separate issue, and compensation has been provided. However, I think that if we had been wise before the event a decade ago and had required the Revenue to be more flexible and to provide a more generous tax regime, we would not have experienced some of the problems that we have had. It is easy to be wise after the event. I think that we should be wise before the event in the introduction of stakeholder pensions.
6.3 p.m.
Lord Ashley of Stoke: My Lords, I welcome the Government's welfare reform programme in general and this Bill in particular, albeit with some important reservations. I welcome particularly the proposals to extend the higher rate mobility component of the disability living allowance to three and four year-olds; to provide for young, disabled people to receive incapacity benefit, with its higher rate, rather than the severe disability allowance; to launch employment initiatives for disabled people; and to provide the disability income guarantee.
These proposals are important and are not given the credit they deserve. The emphasis on helping disabled people to obtain work is excellent. In that respect, I warmly congratulate my noble friend Lady Hollis for her superb presentation. She is a fine advocate for the Government.
I turn now to my reservations. My concern is in relation to disabled people who are unable to work. That is why I wish to concentrate on the proposed changes to incapacity benefit which restrict it and means test it. The Government are proposing fundamental changes to well established principles. If the proposed changes are accepted, they will, without a shadow of a doubt, cause great and undeserved hardship to thousands of disabled people. That is my main objection.
Another concern of supporters of the Government is that a generous Government have become widely perceived to be a mean one as a result of these proposals. Why have they been put forward? Why have the Government suddenly added these lamentable proposals to sensible policies? We now have a Bill
which precisely proposes to reduce benefit entitlement for 170,000 people. Clause 57 would disqualify disabled people from receiving incapacity benefit if they had not paid national insurance contributions in the past two years. The Government do not seem to understand the basic insurance principle or have deliberately decided to flout it.Claimants may have been paying contributions for 20 or 30 years, may have been medically certified by an eagle-eyed Benefits Agency doctor, not a sympathetic general practitioner, to be too incapacitated to work, and yet by Clause 57 could be denied incapacity benefit. I do not understand it. This irredeemably outrageous tearing up of a moral contract between the state and the people rests on the flimsy basis of wanting to relate incapacity benefit to recent work.
Regardless of the fact that the public has unquestionably accepted that national insurance contributions guarantee them incapacity benefit if they become incapacitated, just as they guarantee a retirement pension in old age, and regardless of how severely disabled they may be, the blind, the deaf, the sufferers of multiple sclerosis, the paralysed, will all receive the answer that no incapacity benefit is payable if they have not worked and paid contributions for the previous two years, irrespective of how long they have paid contributions. Such a policy defies understanding, logic, morality and compassion. However, I am far less concerned in this debate with compassion than with understanding, logic and morality.
Perhaps Ministers have been thrown off balance by assertions that the previous government encouraged unemployed people to claim incapacity benefit in order to reduce the embarrassingly high unemployment figure. I think they probably were. However, the question of whether that may have happened in the past is totally irrelevant to the future. The demarcation is clear, especially as the Government's Bill proposes no action against those who are allegedly on incapacity benefit without justification. It deals solely with future claimants.
Ministers talk about the past but intend to do nothing about it. They use the past as an excuse to hit disabled people in the future, even though they are medically certified to be incapacitated and pass the necessary medical tests. This must be one of the most remarkable political non sequiturs in parliamentary history. Ministers and other members of this House talk of the growth of benefit claims as a justification for action, but they act on a totally separate and unrelated matter, that of future benefits for entirely different people. They are using the classic diversionary tactic of all magicians and spin doctors, and I regret it. If they want to ensure that the gateway to the benefit is appropriate, I would strongly support them. But their present policy is inexplicable, inappropriate and incomprehensible.
The second major blemish is the proposal in Clause 58 to means test incapacity benefit. Anyone with an occupational pension of more than £50 a week starts to lose 50p of their incapacity benefit for every extra £1 of occupational pension. Perhaps Ministers are under the illusion that many incapacity benefit claimants with
occupational pensions are millionaires. How else can we explain their constant repetition that 44 per cent of incapacity benefit claimants are in the top 40 per cent of the income distribution band? We have heard that from my noble friend and from other Ministers time and time again. What impression are they trying to create? We have heard talk today of the 100,000 people having around £234. What is 100,000 out of 1.7 million people? The vast majority are nothing like wealthy or well off. The Government should acknowledge that people with average incomes--these people are not well off--are also in the top 40 per cent of income distribution.The propaganda about "wealthy" disabled people on incapacity benefit is unacceptable. The Government have included the disability living allowance as part of the income of invalidity benefit claimants. Everyone knows that that is inappropriate because the DLA is solely for the extra costs of disability. Furthermore, many recipients are receiving the old, higher invalidity benefit rate, which is £20 higher and inflates the income figures. Future claimants, to whom the Bill refers, will not get that higher rate so their income will be lower. Therefore, the figures given for those people are in a real sense misleading.
Again, Ministers point their finger at one group but take action which includes another. They assert that 44 per cent are in the so-called higher income brackets but go on to clobber some of the other 56 per cent who are in the lower income brackets. Although the £50 limit is not in the Bill, it was in the consultative document. Why on earth are a Labour Government proposing to penalise disabled people because they have an occupational pension starting with an amount as low as £50 a week? Those people have £6,000 a year. Compared with average incomes of some £15,000 a year and average earnings of some £20,000 a year, people on £6,000 a year are far from well off. Those are the people who will be hit by the proposals in the Bill if the House accepts them. That is what is wrong with the proposals.
Ministers say that one can have a pension of approximately £10,000 a year before losing all benefit with the tone of those who believe that £10,000 a year is a king's ransom. In fact, it is well below the average income. To take the whole incapacity benefit away from people receiving this, and who are incapable of work, is genuinely shocking. Are Ministers really surprised at the outrage expressed by disability organisations? In fact, the numbers on incapacity benefit are now 5 per cent lower than when it was introduced in 1995 and the expenditure has fallen in the same period from nearly £9 billion to £7.4 billion. Compared with Europe, our expenditure is low.
I hope that the Government will reconsider in the light of the reservations and criticisms expressed in this House. After the debate I shall be tabling amendments to get rid of Clauses 57 and 58. I understand that those amendments will have support from noble Lords on all sides of the House. We will debate them in Committee in great detail. I hope that the Government will be able to proceed without damaging many thousands of disabled people in the future, as these proposals will damage them. I hope that the Government will honour their moral contract to people who have paid
contributions in good faith. I hope that they will reject the notion of poor disabled people subsidising very poor disabled people. I hope that they will withdraw Clauses 57 and 58 and think again so that we can offer them warm and unreserved support.6.16 p.m.
Lord Campbell of Croy: My Lords, I thank the noble Baroness, Lady Hollis, for so clearly introducing the Bill. It will be no surprise that I intend to confine my remarks to the parts of the Bill affecting disablement. At this first stage of the Bill, I declare again an interest as having received a war disability pension since World War II. It is relevant if I now add some background information. I have passed through various stages of immobility and disablement, from being strapped down to a hospital bed in body length plaster, through months of being bed-bound in hospital, then in wheelchairs, then on crutches, and, about two years after being wounded, on my pins again with calliper help, which I have needed ever since. I mention that because I have experienced those various aspects of disablement and I think that I understand them. I am now partially disabled, a credit to St. Bartholomew's Hospital where the damage and paralysis caused by a bullet passing through my middle were expertly treated, operated on and reduced.
As I have previously made clear, I consider that reform is necessary and I favour it. My objections to some of the clauses are that the Government are proceeding in the wrong way. That is also the view of the 12 leading disability organisations which resigned from the Government's Disability Benefits Forum. They resigned for a second reason also. The impression was being given by the Government that they had agreed with the proposals in the Bill. In fact, their complaint was that there had been little consultation after the Green Paper, consisting mostly of platitudes with which few could disagree, of March last year, and that little attention was given to their views when they were consulted. By good chance of the ballot in this House I was able to initiate a debate on reform immediately afterwards--early in April last year--and I publicly encouraged the author of the Green Paper, the then Minister for Welfare Reform, Mr Frank Field, in his endeavours. Soon afterwards, he dropped out of the Government.
Reform in the area of disablement cannot be carried out sensibly by rough, draconian measures. Careful pruning and adjustment are needed if glaring anomalies and considerable distress among disabled people and their families are not to be created. I accept some blame for the present complex system of benefits and the need for rationalisation and simplification. Forty years ago, when I entered Parliament in the other place, state benefits for disability were virtually limited to war disability and industrial injury. I was conscious of that and became involved in finding remedies. The noble Lords, Lord Morris and Lord Ashley, entered Parliament a few years after me and in the Parliamentary
Disablement Group, along with other parliamentarians, we drew attention to the particular needs of disabled people.The Beveridge report led to the national insurance scheme starting in 1948. It did not contain provisions for disablement. Understandably, in 1948, it was principally concerned with unemployment and with situations causing lack or loss of work. Disablement qualified only for national assistance, the then basic safety net.
The big change occurred in the 1970s. The pressure came from an organisation called the Disablement Income Group (DIG), which I helped to start in the mid-1960s. Some noble Lords will remember the founder, the late Megan Du Boisson, a housewife in a wheelchair. They may also recall the special arrangements made to give access to the first wheelchair in the Public Gallery of the other place when she attended a debate on disablement, which I initiated in the late 1960s.
The new benefits for the disabled were introduced in the 1970s. The attendance allowance came into existence in 1971 when I was a member of the Cabinet and the mobility allowance in 1976 when the noble Lord, Lord Morris, was the Minister for Disabled People. Of course, there were others. I hope that the House will note that at those times both Conservative and Labour governments were in office.
In that connection, I was puzzled by a reply from the noble Baroness, Lady Hollis, to a supplementary question that I asked on Wednesday 26th May. I drew the attention of her private office to her reply on Monday, but I have not heard any more. The noble Baroness said:
- "Disability benefits were introduced immediately after the Second World War".--[Official Report, 26/5/99; col. 924.]
Was she referring to war disability payments? As I said, I am not aware of any disablement provisions applicable to the public in general in the first 25 years after the war. That was the main reason for the founding of DIG.
Turning to the Bill, the main effects on disabled people are that someone who has worked and paid national insurance contributions for 10 or many more years and who has become so disabled that the Benefits Agency's doctors assess him or her as unfit for work will not be eligible for incapacity benefit however severe the disablement if they have not paid national insurance in the last two years. As the Government are abolishing the severe disablement allowance for new claimants, the same person--who has perhaps been out of the labour market for two years looking after children--will not have access to the lower level benefit either.
At present SDA is the replacement benefit available to those who do not have enough national insurance credits to claim incapacity benefit. If a new claimant
is eligible for incapacity benefit--meeting the Benefits Agency's medical test--and has paid national insurance in the past two years, that claimant would face a means test as soon as the pension income reached £2,652 a year. For every pound over £50 a week in pension income, the Government would withdraw 50p of incapacity benefit, which is already taxable. By the time the pension income reached £9,542 for a single person, all the incapacity benefit would have been withdrawn.Changes were made in 1995 by the previous government who carried out a reform of incapacity benefit. It does not seem necessary to do all this now. The present Government propose to transform the situation by the two-year provision and by means testing. Since he left the Government, Mr Frank Field has stated his opposition to means testing on the grounds that it is a disincentive to saving and to earning through work.
It has also been pointed out that disabled people who have been saving to supplement their benefits, especially those who know that their disabilities are likely to worsen and force them later to give up work, will feel totally let down by the introduction of a means test as, in the past, they have been encouraged to save to supplement the benefit.
It has been pointed out by the Disability Benefits Consortium that the proposals in the Bill, especially those in Clause 60 abolishing the severe disablement allowance, will have a greater impact on disabled women than on disabled men. That appears to conflict with the Government's pronouncements and with the presence of a Minister for Women in the Cabinet who is also the Leader of this House and the observations on women made by the noble Baroness, Lady Hollis, in her opening speech.
In due course, I look forward to a clearer explanation of the new gateway, or gateways, and I shall defer inquiry and comment about the compulsory interviews until later stages of the Bill. However, what is proposed for the existing "all work test?" I detect a certain ambivalence, indeed an apparent contradiction, within the Government. The parliamentary statement that accompanied the Green Paper in March last year stated that the test writes off too many, but before the general election, over two years ago, Labour opposition spokesmen were complaining that the test was too severe and did not write off enough people as a result. That raises the question whether a test should be of what a disabled person cannot do, or what a disabled person can do. I am in favour of a positive attitude to helping disabled people to find out what jobs they can do. However, I draw attention to a strong recommendation by the National Association of Citizen Advice Bureaux which recommends that,
- "any test which is to determine whether a person is entitled to benefits on the basis of being unfit to work should be divorced from questions about the person's future capacity for work".
I hope that the Government will take that recommendation into account.
The noble Baroness is no doubt anticipating lively debates at later stages on particular matters affecting disablement. I am sure that they will take place, and I intend to take part.
6.30 p.m.
Baroness Castle of Blackburn: It is a common device of Ministers of all governments, when introducing legislation about whose reception they are a little uneasy, to begin with a stream of social statistics with which nobody can disagree. The Minister did that brilliantly this afternoon; she is very good at it. I share the admiration of my noble friend Lord Ashley for her Front Bench skills, but I felt the hungry sheep looked up and were not fed.
I was waiting, and I suspect the right reverend Prelate the Bishop of Bradford was waiting, for a drawing-together of that picture; an analysis of the elements and new security we could introduce into people's lives and how we could best help them to close the gaps in the security which our people seek. When the Minister spoke I was reminded of the nursery rhyme:
- "Little Jack Horner sat in a corner
Eating a something-or-other pie.
He put in his thumb and pulled out a plum
And said, 'What a good boy am I'".
This Government have a slogan: "We are not going to go back to tax and spend". Of course, we cannot spend unless we tax or we cut. What the Government mean is that they are not going to have any sort of radical distribution of wealth by, for example, restoring the 50 per cent income tax rate for the richest 80,000--I got the figure from the Library the other day. No, we must not do that. Rather, when we want to help the widowers, we must take it from the widow. So the broad distribution of income throughout society remains the same.
The best speech so far this afternoon came from the right reverend Prelate the Bishop of Bradford when he asked: where is the vision? I ask: where is the concept?
Where is the analysis? The Minister will reply, "Of course we have vision. Have not the Government in their briefing on this Bill started with 'Our central principle is that those who can, work; and those who cannot get security'?" I entirely agree with that, though I do not know why it is flaunted under the banner of new Labour. That was propounded by Beveridge 50 years ago when I was a stripling, comparatively speaking, and campaigning at street corners for the implementation of the Beveridge Report.Beveridge had a work ethic. He said, "If you can work, when you work you will be compelled to contribute for your own security for the days when you cannot work". But he had machinery for it--a contributory, compulsory national insurance scheme covering everyone. So that everybody, when they were working, was compelled to put into the fund, and when they could not work they drew out as of right. How right the right reverend Prelate is to emphasise above all the burning need for people to have dignity.
What shocks me about this debate is that there has been a theme running through it--particularly in speeches from the Benches opposite but also from some on this side--that we cannot give benefits as of right to people who have saved and acquired a good occupational pension. No; they must be means tested. I have two comments to make about that. First, I have never heard a greater disincentive to save and earn than the propositions that have come from many spokespersons this afternoon. Anybody who saves above their national contribution rate should receive what they produce by savings as of right, and it should not affect any other income they have. Otherwise, why save?
I receive lots of letters from pensioners and they are great eye-openers. It is like going among a crowd of those who are struggling, and listening to their stories. One I received recently was from a woman who said she was on a basic pension of £68 a week. She was saying that because she had certain savings, she was not entitled to income support. But, she added,
- "My friend, who is on income support, will receive £78 a week and rises in line with earnings".
That is because she is on income support. Because the writer of the letter receives a contributory pension the Government say they cannot afford the earnings link; they can only afford to keep people in indignity. Incidentally, means-tested benefits are much more expensive to administer. It costs £5 a week more to administer a means-tested benefit than to administer the basic pension scheme.
- "I don't begrudge my friend what she gets".
Because she is on income support her friend is getting this extra and that extra. She even gets free treatment for her pets at the PDSA, which the letter writer is denied. However, she says,
"I feel very bitter that I have worked all my life, saved, brought up a family and bought my own home when I would have been better off staying at home and having a good time".
If I am allowed a slight digression, I am reminded of a lovely cartoon in the Daily Telegraph recently which amused me. Two old boys sitting in wheelchairs, with rugs over their knees, in an old peoples' home. One said gloomily to the other, "To think we gave up smoking for this!". I am a smoker myself and so it struck a chord. People are saying, "To think I gave up a good time for this. I would have had more fun. If I had been a bit more of a ne'er-do-well, I would be getting all sorts of benefits".
The great challenge that anyone who wants to give us a modern welfare system has to face is how to build up satisfactorily benefits as of right, on top of which--and Beveridge always said this--those who wanted extra could save for it. That was the principle when some of us in the 1974 Labour Government genuinely sought to modernise Beveridge. We did not confuse modernising with reducing. What we said was, "We can't do everything; it is not right we should try. But we want to secure for everybody a basic income which will be adequate to lift them above the indignity and the disincentives of means-testing, and on top of which they can build any further improvement for which they may wish to save". So we had the compulsory second-tier state pension--SERPS.
I will now touch briefly on the pensions aspect of this Bill. It grieves me that this Government, and my own Government I am afraid, set out with an exactly opposite intention--as far as I can make out. That was, first, to allow the basic state pension to wither on the vine by refusing to operate it in line with average earnings and, secondly, to destroy SERPS.
They talk about partnership. You can imagine how the pensions industry watched this rebellious redhead when she was put in charge of drawing up a new pensions scheme. I remember that we ended by hugging each other. Lord Byers, who was then representing the pensions industry, threw us a party to celebrate the passing of our legislation. Only the other day I had somebody to tea in the House dining room--I will not reveal the name of the firm, a private insurance company--who said "Yes, we welcomed your scheme. We thought it had consensus. We thought we had taken the politics out of pensions and at last had a real partnership, which was not undermining our industry but dealing with the people we know private pensions cannot deal with. We do not want the responsibility for dealing with them. Let the state take them off our hands and then we are free to go ahead and entice them to save a bit more".
It breaks my heart when I think of all the hours we spent considering the logistics of this new scheme--and of course the costs. I will just say this about SERPS. This Government have turned their back on it--it is too expensive. In the pensions review, on which some of us have wasted the last three years--I was going to say the
best years of my life--because nobody took any notice of what we said, of course, the Eagle Star Life Assurance Company in its evidence to the Government said of SERPS:
- "It presents enormous benefits in terms of absolute portability, extremely low costs and an efficient system of distribution, but",
it adds, dismissing it,
"it is poorly understood".
Of course it was poorly understood because, a year after we introduced it, the noble Baroness, Lady Thatcher, came into office and she made darned sure that nobody understood it because she wanted to destroy it. She only succeeded in halving its value. It was too popular.
In any sane analysis of this new type of society in which we live and its needs we shall find there is a place for state insurance, strongly reinforced as we sought to reinforce it, modernised as we modernised it, and the private insurers for those who are wealthy enough to take advantage of them. So, yes, as far as I have any influence, this House will be asking the Government to think again.
6.47 p.m.
Lord Rix: My Lords, one of the great dreads of my early days in the theatre was the possibility of having to earn a living by taking part in twice-nightly weekly rep. Happily, I managed to avoid that theatrical hard labour but I fear I may be accused of giving a second house performance this evening, following on the brilliantly delivered prologue voiced by the noble Baroness, Lady Hollis, and the equally wide-ranging first house performances given by the opening eight speakers. If, therefore, your Lordships believe that you have heard all my lines earlier, I apologise, but I hope that you will listen all the same. After all, my inflections may be slightly different, for they underline some of the worries so many of us feel about a number of sections of the Bill.
I will not have been alone in following with interest the debate in another place and in the press about welfare reform. It strikes me that there are certain objectives shared by supporters and opponents of the Bill. When the welfare reform project kicked off last year it was clearly stated that the Government intended to establish a new contract for welfare--a transparent system in which people build up entitlements on which they can rely and be rewarded for so doing. All those are laudable aims which are widely accepted. The Welfare Reform and Pensions Bill must be considered in the light of those promises. I must confess that I have difficulty in reconciling such aims with the package of measures on disability benefits and widows' entitlements now before us.
It will not surprise your Lordships that while I make common cause with those who speak for disabled people in general, as president of Mencap I have particular concerns for the effects of the Bill on adults and children with learning disabilities, and on their families and their carers. The word "reform" is being used fairly extensively as if it had intrinsic value. Reform is being heralded as the ultimate political achievement. Indeed, the media have challenged those who oppose certain aspects of the Bill as though they are reactionaries, standing in the way of progress. I hope that your Lordships will not construe my criticisms of the current proposals as veiled criticism of inventiveness or progress.
We are told that people are wise to ways of abusing the system--most notably men in their early fifties and sixties who are nearing retirement age. We are told that what is needed is a greater link between incapacity benefit and work, and consequently that the plan is to restrict incapacity benefit to those who built up sufficient national insurance contributions through work in one of the last two years.
I am afraid that I am not impressed by the argument that if someone has had a spell of unemployment, has been seeking work, and then presents himself as incapable of work with medical evidence to back that claim, that constitutes abuse. It is not inherent in the human condition that unemployment cannot be succeeded by genuine incapacity. It seems quite straightforward that people are more likely to become incapacitated as they grow older. Indeed, one ought to look sympathetically upon those who continue their job search for as long as they can and only gradually reconcile themselves to the limitations of their disability.
It is worth taking a moment to illustrate the possibly unintended consequences of such a policy. Mary has a severe disability. After school, she went into further education, followed by two years' paid work in which she paid full national insurance contributions. At this time her disability increasingly limited her ability to do the job. She was forced to give up and look for a different position. For two years she has been trying hard to get a job and failing. Mary will be aged 24 when the Bill arrangements begin. She has paid no contributions in the past two years. She is not at college and her past contributions count for nothing. She will get no incapacity benefit because it is more than two years since she paid any contributions; and, of course, she will not be able to fall back on severe disablement allowance because it will have been abolished.
I would not view Mary's claim to incapacity benefit as abuse. I do not see Mary's loss of benefit under the Bill as constituting anything I could call "welfare reform." There are many Marys in this country. That is why the Government expect to save £700 million on this measure. In the first year, 45,000 disabled people who cannot work will be worse off, rising to 335,000 people over 10 years. Gone is the promise made a year ago that the savings would come as people with disabilities were helped back into work.
I hope the Government will explain the basis for excluding a person from incapacity benefit when that person will have passed the stringent all-work test. There is nothing in this measure which will actually help disabled people get back to work. In fact, one could argue that the onus will be on the individual to get out of work as soon as possible to ensure eligibility for incapacity benefit. This clearly runs counter to the Government's philosophy "work for those who can" and--if anything--compounds what the Government call "debilitating welfareism."
The general view that the Government want to target more help on the most severely disabled has been used to legitimise the abolition of severe disablement allowance and the payment instead of incapacity benefit to sick or disabled people under the age of 20. Here again, we have a broad brush policy which, when you scratch the surface, reveals specific anomalies and injustices.
Let us take, for example, the case of Colin. He attends a school for children with severe learning disabilities. He is likely to be recognised as eligible for incapacity benefit when he reaches the age of 16. That is his right and very welcome. His elder brother David has the same diagnosis and the same degree of disability. He receives severe disablement allowance now and is already aged 20 and attending a day centre. He will, under the Government's current proposals, continue to get his severe disablement allowance but will never convert to the higher rate of benefit which is paid out to his brother. It seems nonsense that with the same severity of disability and a similar lifespan, all things being equal, one youngster is entitled to more support than the other. In monetary terms the difference is £27.70 a week.
The abolition of severe disablement allowance will also have a profound impact on women who are assuming a caring role or whose wages bring them below the national insurance lower earnings limit. A relative of one of my colleagues at Mencap, Gill, who is a qualified physiotherapist, is a good case in point. The heavy lifting involved in her work inevitably took its toll on her back. Following the loss of her mother, Gill assumed sole caring responsibilities for her elderly father. Forced to give up physiotherapy, Gill took a part-time job in a local chemist payable at the minimum wage, under the lower earnings limit for national insurance. When the degeneration of her back eventually forces her to give up all work, as it will, she will not be able to receive severe disablement allowance because it will have been abolished. She will not have sufficient national insurance contributions to qualify for incapacity benefit and will not receive any income support because her husband's modest savings will be taken into account.
Ironically, if Gill had given up work earlier, she would have been entitled to incapacity benefit; or, if she had asked the state for invalid care allowance, she would have some protection. But because she chose to be financially independent for as long as possible, she will be penalised. That cannot be what the Government intended. The notion of a contract between state and
citizen is totally absent from these reforms. There are at least half a million people with disabilities earning well below the lower earnings limit who could be affected in this way. Can we rely on the new disability income guarantee to protect them? The answer, unfortunately, is no, as only a narrow group is eligible for the "guarantee"--and that is before the means test is applied.Under "the help for those who need it most" banner, the Government have also introduced an extension of higher rate disability living allowance mobility component to a younger group of children. I am delighted that the Government have acknowledged in the Bill that they can support the families of disabled children in this way. The Government's changes only cover the higher rate component down to the age of three and exclude the lower rate. The Government argue that all children need some help. However, the issue is not whether most young children need some help or supervision; it is whether some, because of disability, need much more help. No one is asking for an automatic entitlement. I merely ask for recognition of the fact that very young children who can only be moved with a respirator or a suction tube, or other kinds of equipment, are certainly less mobile than other young children--and that is possibly from birth. I urge the Government to consider some further change and I return confidently to the assurance that the Bill was not designed with the objective of saving money. Given the level of overall savings, more moneys could well be invested in disability living allowance for disabled children under the age of four.
Another general assertion with which your Lordships may be familiar is the view that a million people on incapacity benefit say they would like to work. The single gateway has become a rallying point for those with reformist zeal. The incentive of the scheme is the prospect of dedicated advice and support on employment opportunities and the range of benefits available. The sanction is the policy of depriving people of benefits for not attending an interview. The single gateway scheme does indeed sound convincing. However, I am still waiting to hear a firm assurance that reality and compassion will be factored into the design of the scheme, and that staff will be trained to assist a wide range of carers and disabled people in a wide range of circumstances--including those with learning disabilities.
Take, for example, the circumstances of Janet who cares for her 11 year-old son with severe learning disabilities. She claims invalid care allowance and is called for a work-focused interview. On the day of the interview Janet is up with her son at 1.30 a.m. He has wet three lots of bed clothes, the carpet and the bedding. By the time she arrives for the interview, Janet has changed the beds, cleaned the mattress and carpets, and done a pile of washing. The following day is a school day but the class is going on an outing and the teacher does not have sufficient support to enable Janet's son to attend, so he will be back at home tomorrow. I wonder whether the adviser understands work as well as Janet understands it, and I wonder whether a compulsory interview is really appropriate. It was the noble Lord,
Lord Morris of Manchester, who said that a disabled child makes a disabled family. There may be positives, too, but it would be foolish to ignore the difficulties and the realities.We have heard from the Government that,
- "the most severely disabled will not be required to attend an interview".
I urge the Government to learn the lessons of the disastrous benefit integrity project, to look again at specifics, and to consider using the stages of this Bill as it passes through your Lordships' House to bring forward amendments to make this measure explicit on the face of the Bill.
In all seriousness the current situation clearly breaches the contributory principle and, as I have suggested on earlier occasions, may also breach the Human Rights Act. The Minister has still not adequately answered that point, despite three opportunities so to do. I shall, when occasion offers, suggest some possibility of a compromise. At this stage I simply note that compensation could be formulated according to loss with the use of a simple formula. I am sure that the noble Baroness will be amenable to constructive suggestions which attempt to minimise the damaging effects on vulnerable widows.
I return to where I started. There is a case for welfare reform; it is the case for breaking the link between welfare and poverty, and for better protecting the dignity of people receiving benefits, not least those benefits which are theirs by right of disability or contribution. Reform requires principles, but principles with clear effects, not principles which result in complicated ambiguities, disincentives and hardship. The only clear effect of this Bill is the effect on the Treasury. What is on offer is a raft of obstacles to work, penalties for saving and lower incomes. I do not believe these reforms bear out the Government's original intentions in any way and therefore I urge the Minister to read tomorrow's Hansard and reflect carefully upon the examples given in my speech and those of other noble Lords. According to my dictionary, reform means the,
- "removal of abuses, especially in politics; improvements made or suggested".
-
I regret that the very title of this Bill is in itself an aberration, as are many of its contents.
7.4 p.m.
Lord Blackwell: My Lords, like the noble Lord, Lord Rix, the noble Baroness, Lady Castle, the right reverend Prelate and many other speakers in this House, on reading this Bill I, too, was struck by the lack of any sense of strategy or vision--at least any strategy that bore out the claim to be a radical reform of welfare. The problem in this area is that when one strings together a whole set of individual measures--however well-intentioned--without a clear strategy, one ends up increasing the complexity of the social security legislation. That increased complexity compounds the problem of social deprivation because people cannot understand or implement such complex measures.
There are some measures in the Bill which I can support on a stand-alone basis, but many cause me concern. I can support the notion of a gateway for benefits and a gateway interview because that fits my belief that people have an obligation to support themselves if they can. I think it is right that they should be presented with opportunities to find work if suitable work is available. I suspect that that process will have been made more difficult by the minimum wage legislation which has reduced the number of those jobs which might have been the first step into work. Like many speakers tonight I have doubts about the reforms of incapacity benefit and removing the right to incapacity benefit through means testing. I have no doubt that we shall return to that matter.
I wish to spend a little time discussing the pensions part of the Bill. I declare an interest as an officer of a financial services company that is a provider of pensions, although I speak in a personal capacity this evening. It seems to me that this is the one area where the Bill fails lamentably to address the issue that it set out to address; namely, that we have a pensions funding problem in this country. The problem is less severe here than in some other countries but, as has been well explained, there is the problem of the increasing cost of pensions in the future if they are to be funded by future taxpayers rather than funded as we go.
Of course many people in this country already fund their future pensions through occupational schemes, personal pensions and other private provision. Therefore the problem concerns those people--particularly those on lower incomes--who are not in a funded scheme and who do not have either the cash or the incentive to put those savings aside at the moment, or have reached a point in their career where they are unable to save up enough to provide for themselves in future. One route of dealing with this that has been mentioned is compulsory schemes. The Government have decided against compulsory schemes and on the whole I tend to agree with that.
However, I do not believe that the stakeholder pension as set out in the Bill provides a solution for the majority of people who are not able or who do not have the incentive to fund their own pension at the moment. This legislation increases the guaranteed minimum
income for people who do not have adequate pension cover but reduces the incentive to save. I believe that these stakeholder proposals do nothing to give people an incentive to save if they are not already doing so. The stakeholder pension is merely a substitute, or rather an additional option, for people who are already saving. I do not think that on the whole it is a good alternative to the options which already exist. It is not obviously better to have a stakeholder pension than one that is provided through current private schemes, particularly if one requirement of the stakeholder pension is that it has limited investment options.The very fact of introducing a new stakeholder pension alongside the other schemes adds to the complexity of choice and as such will tend to discourage more people from trying to "get their head around" pension provision. As the noble Lord, Lord Freeman, said earlier, the attempt to impose a maximum commission of 1 per cent or thereabouts on a stakeholder scheme--while it might appear populist--is unlikely to be sufficient to fund adequate schemes and adequate management, particularly if the Government seek to impose on these schemes what I think is the unnecessary overhead of trustees. It certainly is not sufficient, I suspect, to fund the kind of advice that people need if they are to be faced with such a complexity of choices. I await with interest the Government's clarification of the importance they attach to the advice in the pensions debate. I wonder whether they are prepared, on the other hand, for people to opt for a stakeholder pension without advice, with the risk that they may in fact opt for a form of saving which ties up their capital in a way which may not be appropriate for an individual.
The scheme that does nothing to solve the basic problem. Add to that the complexity of it, and I can only believe that it is largely driven, like LISAs before it, by a desire to create something with a more politically correct name but with substantially more complexity in order to leave behind a legacy under the Government's manifesto.
What is the answer? The noble Baroness, Lady Castle, said that it was SERPS and probably pre-funded pensions. However, that does not address the basic issue of being able to fund pensions from savings. In future the system will rely on people funding pensions as they go. I think there is a better solution. It was worked on by the Department of Social Security and the Treasury before the last election. Many of your Lordships, whose memories go back before 1997, may remember the scheme that was announced at that time. It focused on new people entering the workforce, on the ground that these were people who had time to build up funds, if funds were put aside regularly. It gave them a big incentive to have a pension fund of their own by putting a large part of their national insurance contributions into a fund that was invested and accumulated over their lifetime. If, as expected, that fund accumulated sufficiently to provide them with a pension that exceeded the state pension provision, then it would replace that state pension provision. If, for whatever reason, the fund did not accumulate to the level where
it exceeded that of the state pension then the Government would have guaranteed that at least the minimum state pension would be provided.That scheme provided people with their own pension and gave them the incentive by providing funds with which to do it. Part of the proposal worked out by the Treasury at the time was that to avoid the cost falling too heavily on the Treasury in the early years it would be offset by moving tax relief on pensions from the beginning of the pension to the end. In that way there was a shift in tax relief which would offset initial funding costs. That scheme not only met the test of dealing with the funding problem in the future; it met the test that a number of speakers have mentioned this evening: it gave people dignity. It gave people, of right, a fund of their own with their own name on it which they would accumulate over their lifetime.
It was an imaginative scheme, initially welcomed by the Opposition at the time. It was then rapidly disparaged by them, I can only believe because they saw some electoral advantage by making it out to be a pensions scare, a privatisation. I think that pensions are too important an issue to be the object of party political dispute. The futures of too many people are affected by the matter. I challenge the Government, even at this 11th hour, to look back with an open mind at the fundamentals of that scheme and in considering some of the benefits it might have brought see whether it does not offer a better way forward than a stakeholder scheme which fails to deal with any of the fundamental problems. The Government are fond of committees. If necessary, they could form a committee of pension specialists to look at this side by side with the stakeholder scheme and report back to the House.
If the Government do not get pension reform right this time round, within a few years a future government will come back to this House and another place with a scheme that addresses the matter. The only scheme I have seen which does address the issue is the system that I have just explained. I would rather that it were introduced now than have to wait another few years before another government brings back the scheme. I ask the Government to look at the issue again.
7.14 p.m.
Lord Morris of Manchester: My Lords, as my noble friend is aware, I welcomed many of the measures this Bill provides for when she unveiled them last October. I did so as Labour's first Minister for Disabled People, architect of the basic disability benefits and author of the Civil Rights (Disabled Persons) Bill.
Most of all I welcomed the decision to give more help to disabled children. I also thanked my noble friend for her explicit assurance of no cuts in benefit levels, and warmly acknowledged her role in scrapping the benefit integrity project, BIP. My noble friend clearly shared the concern felt in all parts of this House about the inhumanities of that disastrous project, which humiliated disabled people and brought some to the brink of suicide.
BIP's relevance now is the striking testimony it provided to the honesty of disabled people in relation to the benefits system. My right honourable friend the Prime Minister, in an article for The Times on 15th January 1998, wrote:
- "We spend more on disability and incapacity benefits than we do on the entire school system in the UK. Benefit fraud, estimated at £4 billion a year, is enough to build 100 new hospitals".
But the figure of £4 billion, used also in a report from the National Audit Office, was quickly shown to be entirely bogus. Indeed, on the same day, 15th January 1998, replying to an oral intervention, my noble friend, speaking for the DSS, told me:
"My Lords, I am happy to take my noble friend's intervention ... The report of the National Audit Office ... is based on old information from the benefit project inaugurated by the previous government. I repeat what I said to my noble friend on Tuesday; namely, that in the benefit integrity project ... we have, so far, in the 35 per cent of cases that we have examined, not found a single case of confirmed fraud".--[Official Report, 15/1/98; col. 1142.]
- "Benefit fraud still runs at £4 billion a year. Benefit abuse must be many times that sum."
But as with fraud, so with abuse, the truth will out. And again it came from my noble friend Lady Hollis who, replying to the debate here on my unstarred Question about the take-up of social security benefits on 29th April, revealed that if take-up of disability living allowance and attendance allowance increased, not to 100 per cent but even 90 per cent, spending on these benefits alone would rise from some £8 billion to over £13 billion a year.
"Therefore",
she said,
"there is an under-claim of £5 to £6 billion by disabled people whose needs entitle them to that level of benefit".
With her customary candour and decency, my noble friend, notwithstanding the effect on her department's budget, also said that she personally:
"would be cheering if that happened".--[Official Report, 29/4/98; col. 513.]
What is also very disturbing is that the reason frequently given by disabled people for not claiming their entitlements is fear of being branded as what some in the media call "something for nothing merchants". The same reason is often given by frail elderly people,
more especially single women living alone, for not claiming income support. Shame on any or all of us here if, by commission or default, we condone or allow to go unchallenged those who inflict unmerited distress on such vulnerable people.My right honourable friend Frank Field, then Minister for Welfare Reform, emphasising in another place the Government's top priorities in welfare reform on 26th March 1998, said in a ringing declaration:
- "Our commitment to the vulnerable is not negotiable".--[Official Report, Commons, 26/3/98; col. 686.]
More recently, in an interview with The Times on 4th March 1999, my right honourable friend Alistair Darling's emphasis was on fraud.
"The prevention of fraud",
he said,
"has to be at the top of everything we do at the DSS".
In response, while granting the importance of preventing fraud, the noble Earl, Lord Russell, said in our debate on the take-up of benefits on 29th April that,
"Surely the top priority for the DSS is the delivery of benefits to keep people alive; and nothing else should allow a Secretary of State to forget that".--[Official Report, 29/4/99; col. 508.]
Knowing my right honourable friend, whose appointment as Secretary of State for Social Security came after the Green Paper was published, I feel sure that his concern to stamp out fraud will be matched by a determination to ensure that the benefits Parliament has legislated for reach everyone entitled to them. If that is so, he will be as concerned as I am that the Green Paper--which paved the way for this Bill--made no reference to take-up despite the enormous scale of under-claiming. He will recognise too that failure to tackle low take-up frustrates the will of Parliament and that it is not only disabled people who under-claim. Over £2 billion a year in income support goes unclaimed by the most vulnerable elderly pe