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There is recognition that it would not be reasonable to expect those with the most severe conditions to be required to attend meetings with advisers as a condition of receiving benefit. Part of the new assessment will determine whether a claimant also has limited capability for work-related activity and will therefore be in the support group. ESA simplifies benefits for people with health conditions and disabilities by combining contributory and income-related strands within one overall benefit. As indicated in the drafts provided for debate last year, the ESA regulations make provision for us to require customers to engage with us. In the case of the work-focused, health-related assessment, the aim is to ensure that customers have the opportunity to discuss with a health professional the sort of health-related interventions that could help support a return to work.
The work-focused interview arrangements will be broadly similar to those applying in the Pathways to Work provision. A failure to attend either a work-focused health-related assessment or a work-focused interview without good cause will lead to a sanction. Again, this will work in a broadly similar way to the sanction regime in pathways, although the maximum sanction will not exceed the amount of the work-related activity component, which is £24. Again, as with pathways, there will be safeguards to ensure that vulnerable customers are treated fairly. Where a customer has a mental health problem, or there is a likelihood of a problem with communication, contact will be made with them or their carer or healthcare professional. The purpose of sanctions is not to be punitive but to encourage engagement. The experience of sanctions in pathways shows that they are applied to very few people.
The regulations set out the structure and components of both the income-related and contributory strands of ESA. The rates of benefit need to be seen in the context of a new benefit that has a different focus from the benefit that it replaces, so the read-across cannot be absolute. ESA will cost £400 million more than keeping people on IB over the next five years. This will mean that more people will be getting money sooner than is currently the case and more money will be directed to those who are most likely to need it most. That seems to me entirely inconsistent with challenges that this is going to damage our focus on child poverty. More money is going into benefits over the next five years; £1.1 billion is going into Pathways to Work.
Lord Kirkwood of Kirkhope: My Lords, that £400 million net cost to ESA is a new figure to me,
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Lord McKenzie of Luton: My Lords, I am more than happy to write to the noble Lord to expand on that figure. This is £400 million over the next five years, in comparison to what the position would have been had we continued with the IB situation.
I shall now deal with the point made by the noble Lords, Lord Low and Lord Taylor. We have not broken our commitment about the main phase rate for the work-related activity group. It is £84.50 and this is higher than the long-term rate of incapacity benefit at the time the statements were made. I reject the assertion that we have not fulfilled that commitment. I also say to the noble Lord, Lord Low, that no existing customer will get less than their current rate of benefit. They will continue to get the same rate. There is no question of a million customers losing benefit. The rates are, in context, £400 million in total to be spent on ESA over the next five years—in comparison to what we would have done on incapacity benefit added to the £1.1 billion invested in Pathways to Work. Typically, in the first year a claimant will be £936 better off in the ESA work-related activity, the non-incapacity benefit. More than two-thirds of people are expected to flow off that within a year of starting their claim. In the support group, claimants gain at least £29 a week and £1,131 in their first year. The ESA does focus additional resources on the most severely disabled with a higher rate of benefit for those in the support group. Among the most severely disabled, the poorest will be nearly £16 a week better off under ESA than on incapacity benefits. Although the starting rates of benefit are very similar for ESA and IB, people get more money much sooner under ESA, with most people gaining £24 a week from the fourteenth week of their claim. We believe that around £200,000 will be better off under ESA because they get more money sooner.
I acknowledge that there are issues around the structure of the benefit, certainly in relation to the age addition. We believe that this is an outmoded concept and should have no place in the ESA. The age addition accepts that people go on incapacity benefit and are not going to return to employment. Therefore, we would need to pay them more, the longer they are on it. This is quite the wrong approach, which is why it does not feature in the ESA. There are issues around the lack of couples components in the work-related and support group components, but that is because we are focusing these components on individuals’ functionality. We cannot do that by having a couple’s rate to it. Overall, you will see that there is the prospect of many people gaining from this, particularly over that first year, given that we want to encourage people and help people back into the labour market as quickly as possible. There is less relevance for most in what might happen in year two or three.
The noble Lord, Lord Kirkwood, made reference to the increased number of appeals. There are more decisions in ESA than on IB which are subject to appeal; for example, whether someone should be in
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The noble Baroness, Lady Thomas, also mentioned service users. The treatment of their earnings is a complicated and sensitive area which we are currently considering. I am not in a position to give a definitive answer today, but I will write to the noble Baroness with our conclusion. We are reviewing the rules around the treatment of reimbursed expenses being treated as earnings, and expect to be able to make an announcement later this year.
The noble Lord, Lord Kirkwood, asked about uprating. We review all social security rates every year as part of the annual uprating exercise. Furthermore, we consulted the SSAC informally about the ESA regulations, even though we were not required to do so. The noble Lord also asked about the Budget settlement. We are investing hugely in Pathways to Work—I have mentioned the £1 billion over the next three years—and we are moving towards an agreement with the Treasury to reinvest savings, as Adam Sharples, who was quoted, has indicated.
The noble Lord, Lord Low, asked about disabled students losing out under ESA. The changes under ESA will simplify the existing complex rules for qualification for customers and staff and will ensure that disabled students can continue to claim income-related incapacity benefits where they receive any component of disability living allowance. We believe that receipt of disability living allowance is the correct way of qualifying for education, with income-related employment and support allowances. As DLA is based on how a disability impacts on an individual’s life, it will ensure that the most vulnerable customers will be able to study and receive income-related ESA.
The noble Lord, Lord Taylor, asked about income tax, particularly for people on the contributory strand. Contributory ESA is taxable in broadly the same way as incapacity benefit, and income-related ESA is not taxable. That therefore mirrors the current system. Customers on contributory benefits do not, as a general rule, have their income or capital taken into account in assessing benefit entitlement, and so may have additional income as well as their benefits. But a person whose only taxable income is contributory benefit is unlikely to have an income which results in a tax liability, made more certain by the increases in personal allowances which have just been announced. If you are on only the contributory strand with no other income, you are unlikely to be in the income tax system. Of course, income-related benefit is not taxable because it is withdrawn at one-for-one if the claimant has other income.
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I have tried to deal with as many of the questions as I can in the time available. I hope that my answers have dealt adequately with the concerns expressed today. I will review the record and follow up with further correspondence in so far as I have not had time to deal with the multiplicity of points that have been raised.
The regulations are a vital part of our ambition to create a fairer and more inclusive society where people with health problems and disabilities are better able to fulfil their aspirations. I therefore hope that the noble Lord will not press his Prayer.
Lord Kirkwood of Kirkhope: My Lords, I am grateful to the Minister for that characteristically thorough reply. I am also grateful to all noble Lords who have contributed to this important debate, which will continue.
I am sorry that the Minister, in his response, sounded slightly hurt. We are not against him, but are encouraging him because we are all trying to get to the same place. It is just a shame that some important areas of contention have occurred. Like him, I am sure that the record will repay careful study. I wish the Minister well in getting to where he wants to be, but I hope that he will not mind us pressing the issue from time to time to ensure that he keeps up to the mark. I hope that we have not delayed him too much from his welcome respite over the Whitsun Recess.
On that basis, I am happy to withdraw the Motion.
Employment and Support Allowance (Transitional Provisions) Regulations 2008
Employment and Support Allowance (Consequential Provisions) Regulations 2008
Local Government Pension Scheme (Amendment) Regulations 2008
5.45 pm
Lord Campbell-Savours rose to move, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 16 April, be annulled (SI 2008/1083).
The noble Lord said: My Lords, this is an important debate. It is of the utmost importance that this House fully considers the impact of any changes that we make to the pension entitlements of local government workers. As my noble friend is aware, these workers are the bedrock of services in our local communities. They will have dedicated many years to public service and it is only right, should they fall into ill health, that responsible employers have proper regard and responsibility for them.
I am thankful to the trade union UNISON for alerting me to serious concerns, which I share, regarding the impact of these regulations on its members. These concerns are particularly important to me as I, too, suffer from ill health and understand the sense of insecurity of those who suffer similarly. The proposed
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The regulations make a number of critical changes. First, they make it more difficult for a member to qualify for ill-health benefits. They state that a member must be permanently incapable, for health reasons, of doing their job—as was the case previously—but have a reduced likelihood of obtaining any gainful employment before their normal retirement age. I am concerned that this additional requirement could be open to different interpretations. For example, if it is interpreted as the ability to do a totally different job, regardless of the level of pay, suitability or availability, it is possible that a seriously ill member of staff could lose their job through ill health and then receive no pension or other benefit from their former employment, despite having contributed to the scheme. I would welcome the Government’s assurances that this is not their intention.
Perhaps my noble friend could also explain why the Government have taken this stance for local government workers when it is out of step with other public service schemes, such as the NHS pension scheme and the teachers’ pension scheme. These ensure that a member who retires on permanent ill health will receive at least a pension based on what they earned to the date of their leaving. This would be without an assessment as to whether a member could obtain any other type of gainful employment. I would be grateful if my noble friend would consider whether it would be possible to align the local government pension scheme with other public service pension schemes on this point.
Secondly, there are particular concerns over members who qualify for level 3 ill-health retirement. The level 3 pension is intended for those who are judged permanently incapable of doing their job, but capable of gainful employment within a reasonable time after leaving. The regulations define a reasonable period as three years. They state that, in all cases, benefit will cease after three years without a requirement for the employer to review at this point whether the member is still unfit to obtain regular gainful employment. I am concerned that there has been flawed consultation on this three-year definition. There seems to have been no consultation on the provision to stop the pension after three years. I ask my noble friend if he will set out in his response how this definition was agreed and what consultation there was on this issue. Is he entirely satisfied that the consultation process undertaken by the department was comprehensive and rigorous, allowing for a full examination of the impact of the regulations? Does he believe that it would have been better to issue draft regulations first for discussion by stakeholders?
On consultation, will my noble friend respond to the Merits Committee report, which specifically criticised the department on its consultation process? It stated:
“We feel obliged to record our disappointment at the inadequacy of the information about the consultation process which the Department included in the Explanatory Memorandum; we are concerned that this is not the first time that the Department for Communities and Local Government have fallen short in the content of such Memoranda”.
The third issue that I will draw attention to, again in relation to the level 3 pension, is what happens to a
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Perhaps I can give an example. A member is suffering from a severe depressive illness that makes them permanently incapable of doing their job or any work, to the point that they have to leave, but the medical adviser believes that they will recover sufficiently, say within two years, to do some regular, gainful employment. Under the regulations, the employer would review whether they are still incapable of obtaining gainful employment after 18 months but, at three years, when the benefit stops, there is no requirement to review the case. Can that be right?
Fourthly, under the regulations, gainful employment is defined as paid employment for not less than 30 hours in each week for a period of not less than 12 months a year. However, to date there is no clear or agreed definition of what constitutes paid employment. If we are left with its common usage, a member who is a paraplegic and is deemed capable of working in a call centre would not receive any benefit if they were capable of that employment at the date of leaving. I hope that my noble friend will agree that, for the regulations to be implemented successfully, “paid employment” must be defined and cannot just mean any employment.
Fifthly, we understand that the intention was to ensure that no one covered by transitional protection who retires before 1 October is worse off than they would have been under the old scheme. But the regulations seem to require that all those who retire after 1 April will fall under the new definition with its inherent problems, as set out in my earlier point. Can my noble friend give an assurance that those in the process of being retired on ill health will not have to suffer a further period of uncertainty and will be treated in no worse a manner?
Lastly, I will express some concerns about the very premise on which the regulations are based. My noble friend will know that the ill-health retirement package of the local government pension scheme is aimed at saving the scheme considerable money, equivalent to 1 per cent of the pension payroll. That is what we are told. However, the numbers of ill-health retirements in the local government pension scheme have dramatically declined over the past years, and indications are that the trend will continue. I am not altogether sure that it is necessary to treat those capable of some kind of employment in such a penal way. In addition, there are no data to indicate how many future ill-health retirements will fall into which of the three levels. Government costings appear to be based purely on estimates.
The Department for Communities and Local Government has made much of the top-level entitlement, which provides for those who are mostly seriously disabled to receive a lifetime pension based on a 100 per cent service enhancement to normal retirement date. However, CLG’s estimates suggest that only 15 per
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My noble friend knows that this whole issue is of major concern to UNISON and other unions in local government. He will also know that I provided him with some background information on the questions that would be likely to be asked during this debate. I hope that my noble friend can respond positively to my questions. I beg to move.
Moved, That an humble Address be presented to Her Majesty praying that the regulations, laid before the House on 16 April, be annulled (SI 2008/1083).—(Lord Campbell-Savours.)
Baroness Hamwee: My Lords, it occurred to me on my way down to the Chamber that I should declare an interest, although I do not think that I fall into the description given by the noble Lord, Lord Campbell-Savours, of most of the members of this scheme; but I will have a pension, as I have been employed—because that is what membership of the London Assembly was classed as.
I understand, I think, the concern to ensure that an employee who has retired on the grounds of ill health, but who subsequently works again—and I have come across a handful of people in that category over the years—should not be claiming in a way that is seen to be either to the detriment of the scheme, because it takes money out of the fund, or unfair. I came into the Chamber during the previous debate and heard my noble friend Lady Thomas of Winchester refer to honest benefit claimants who are the most angry about those who claim dishonestly. I do not suggest that there is considerable dishonesty, but not everything is perfect.
The noble Lord raised some extremely important points. One of the most important is that regulations that come into effect from 1 April are before us only now, courtesy of the diligence of noble Lord and UNISON. The regulations were first laid on 7 May. The Explanatory Memorandum refers to other parts of the regulations as providing clarity and clarifying certain definitions in other regulations. I take that as code for, “We are now correcting something that we did not get right in the first place”.
I hope that the Minister can tell the House what the policy review group has had to say about these regulations. I looked at the website, because I discovered that such a group existed and that its remit is to comment on this sort of thing. I could not find any comment. That is an extension of the points made by the noble Lord about consultation. The Explanatory Memorandum states that an analysis of responses will shortly become available. I could not find that either; it is not satisfactory that Parliament should be asked to approve, or by default approve, regulations without proper publication of the responses. My lack of technical skill may have meant that I could not find the responses on the website, but if they are so obscure that they are difficult to find, a similar point applies.
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6 pm
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