Welfare Reform Bill

My Lords, I beg to move that this Bill be now read a second time. The reforms in this Bill mark a watershed in the history of social security in this country. They break the link between welfare and dependency; they destroy the old notion that sickness or disability equates to a life on benefit; and they replace the concept of incapacity with a new focus on capability, delivering on the Government’s commitment to reform incapacity benefits, while ensuring security for those who cannot work. The Bill is premised on the belief in an active, enabling welfare state that matches rights with responsibilities and puts tackling poverty and social exclusion at its core. It enshrines a new and very welcome consensus, founded on clear progressive values of opportunity and security. It is supported by an evidence base that highlights both the crucial importance of these reforms in meeting the challenges of an ageing society and the potential of developments in the management of health conditions for helping people to realise their ambitions in the workplace. Soon, there will be more people celebrating their 85th birthday each year than starting primary school. The potential implications of this rapid demographic shift are profound, whether in terms of the potential tax burden, the demand for state services or the pensions that people receive. Ultimately, as an economy and as a society, we cannot afford to be denied the skills and contributions of any of those who want to work. Indeed, our economic security and future prosperity hinge on the opportunity for work being open to all. However, the rewards of work are much more than just economic. A report published only last year concluded that work is central to a person’s individual identity, their psychosocial needs and their physical and mental health. It found that unemployment can lead to higher mortality rates and poorer health, while returning to work improves health by as much as unemployment damages it. From the amalgamation of the Benefits Agency and Employment Service to the extension of the Disability Discrimination Act, extending the opportunity to work has been at the core of our welfare reform agenda since 1997. We have made work pay through the minimum wage and tax credits, and through record investment in the New Deal and Jobcentre Plus we have begun to create an enabling welfare state that responds to the needs of individuals, pioneering new active welfare support to overcome specific barriers to work. The Bill marks the next stage of that journey, building a modern welfare state, allowing people to exercise this fundamental right to work. Importantly, it takes us a step closer to our aspiration of an 80 per cent employment rate, aspiring for a million fewer people receiving incapacity benefits, as well as a million more older people in work and an extra 300,000 lone parents off benefit. For too long, people with health conditions and disabilities have been denied the right to work, condemned to a lifetime on benefits because the system presumed them incapable. This has culminated in over 2.6 million people becoming dependent on incapacity benefits. When people come on to benefit, eight out of 10 want or expect to return to work. After two years, however, they are more likely to die or retire than fulfil their goal. The current benefit system does not support their aspirations. That is why the Bill seeks to embed those aspirations within the structure of a new benefit. Part 1 of the Bill makes provision for the new employment and support allowance which will replace incapacity benefit and income support based on incapacity or disability. That will eradicate the concept of incapacity embedded within the current system, and replace it with the concept of capability. For the majority, this will mean the additional responsibility of being actively engaged in preparing for a return to the labour market in return for the additional support. This is achieved by embedding the principles of the successful Pathways to Work pilots within the benefit structure. We know that Pathways to Work works. It is the most successful initiative of its kind across the world. In pilot areas, the recorded number of job entries for people with health conditions and disabilities has almost doubled since it started. In return for the additional support provided by the national rollout of Pathways to Work, the vast majority of claimants will be required to attend regular interviews and, in time and when resources permit, undertake work-related activity. Those refusing to engage with the help and support offered without good cause could see their benefit reduced progressively in stages, down to the basic level of jobseeker’s allowance rates. At the heart of our early success with the New Deal and Pathways is the fundamental principle of ““something for something””. Simply to introduce a voluntary system of employment support would be to exclude those who have lost the motivation and confidence to volunteer. Our experiences from existing programmes conclusively show the importance of actively engaging people and the difference it can make to their aspirations to return to work. The added incentive to participate embedded within the benefit structure is therefore essential to its success. Proof of the success of these measures will not come with a large number of cases where benefit sanctions are imposed, but in the number we can get out of poverty and back into employment. Indeed,in current Pathways to Work areas, where extra conditions have been put in place, around 1 per cent of claimants have been sanctioned, a mark of the success of the deal that we have developed for people on incapacity benefit. A core component of that deal, however, is the recognition that there are some whose benefit it would be unreasonable to make conditional on undertaking work-related activity. For those whose health condition or disability has the severest impact, there will be a higher rate of benefit, exempt from work-related conditions, although they will be able to volunteer for appropriate available support. The new personal capability assessment (PCA) will make the distinction between these two groups. It is a crucial distinction, on which the Government have rightly consulted extensively. We have been particularly conscious of how important this process is for people with mental health problems and learning difficulties, so we have worked closely with consultative groups on the design of the assessment. Rather than just being focused on benefit entitlement, the new PCA will examine not only what an individual person cannot do but what they can do and what help they need to fulfil their potential. The points system used by the existing PCA to determine entitlement to incapacity benefit through looking at whether people can carry out certain activities will remain. There will be a revised assessment of both physical and mental health, and revised descriptors and point scores will be used. Following our continued consultation with stakeholders, we intend that regulations will continue to allow the point scores for physical and mental health descriptors to be added together to calculate the final assessment. This decision has been made as a direct result of continued engagement with our stakeholder groups. These regulations will be included in Welfare Reform Bill—Draft Regulations and Supporting Material, which will be available in the Library later this week. Those assessed not to have to undertake work-related conditionality will still have the opportunity to voluntarily access appropriate support. A modern welfare state cannot afford to leave anyone behind. No one will be written off under these reforms. That is also why existing claimants of incapacity benefits are already able to volunteer for the support available through Pathways; this coverage will be extended as Pathways is rolled out nationwide. Over time, we will migrate existing customers on to the employment and support allowance. I can assure noble Lords that people on incapacity benefits will have their current cash levels of benefit protected. The evaluation of interventions with existing customers in the original seven Pathways to Work pilot districts will help to inform our approach to conditionality for those claimants. As has been the case in Pathways areas since their inception, anyone currently on incapacity benefits will be able to volunteer for any appropriate support on offer. This radical new approach to the treatment of people with health conditions and disabilities will transform not only the lives of the tens of thousands of benefit claimants who will be helped into work but also the lives of their families. Part 2 provides for the simplification of the existing housing benefit system to improve work incentives and encourage greater personal responsibility. Housing benefit is complex, does little to promote social responsibility and, at times, can act as a barrier to work. It is also a passive benefit. Most claimants have their benefit paid directly to landlords, which means that many are unaware of how much rent is paid on their behalf. It does nothing to prepare people for work and is completely at odds with the active contract which we are seeking to create with our wider reforms of the welfare state. That is why the powers in Clause 29 will facilitate the rollout of the local housing allowance to all tenants of the deregulated private sector. Local housing allowance bases housing support payments on a system of standard maximum allowances that are calculated according to both the size of household and the location of the property. As with the Pathways programme for those on incapacity benefits, this policy has been tried and tested and has proved successful not only in simplifying the benefit but in promoting fairness and personal responsibility. Under the local housing allowance pathfinder areas, wherever possible, payments are made to tenants themselves rather than to landlords. This not only promotes financial inclusion and gives people more freedom over their housing choices, it prepares people to move out of benefit dependency and forthe responsibility of paying their full rent. The appropriate safeguards are in place for when tenants have difficulty in managing their affairs. However, evidence from the pathfinders has shown that the proportion of payments being made to tenants as opposed to landlords has risen from 40 per cent to85 per cent. There has been no rise in landlords reporting payments in arrears, which shows that people are taking on the responsibility of managing their housing costs. Clause 30 seeks to test out a further mechanism for embedding social responsibility into the benefit system through taking the powers to sanction housing benefit from people who are evicted as a result of anti-social behaviour and who then refuse to take up rehabilitation when offered to them. People have the right to support but they also have a duty to act in a socially responsible manner which does not damage the community in which they live. We have to make a stand to ensure that people realise that there is a line that they cannot cross if they want to continue to expect state support. That is right and fair. We intend to pilot this scheme in 10 local authority areas over a two-year period, with the appropriate safeguards in place for vulnerable children and adults. Let me be clear: the proposal is not a punishment; it is a measure of last resort to encourage people who have already been evicted to take up the rehabilitative support that we offer them. If we really believe in the principle of rights and responsibilities, there must be clear limits to the behaviour that we will tolerate. At this point, I acknowledge the debate that has taken place on the single-room rent and the desire of some to see it abolished. I reiterate that the consequences of that could mean that young single people could afford a level of housing which many of their working peers could not. That would undermine work incentives and go against the grain of what we are trying to achieve with the welfare reform agenda. Part 3 takes forward several measures to improve the administration of social security. It includes powers to improve information-sharing between my department and local authorities. This will help us to work towards our goal of improving the take-up and delivery of benefits—in particular, pension credit, council tax benefit and housing benefit. Common information would need to be given only once to one agency, and that would reap both efficiency gains and improvements in customer service. Although fraud in income support and jobseeker’s allowance almost halved between 1998 and 2005, there is still a long way to go. For a suspected fraud involving both housing benefit and jobseeker’s allowance, the local authority can only investigate and prosecute fraud against housing benefit. That could mean either that the offence involving jobseeker’s allowance was not investigated or that a duplicate investigation could be carried out by a DWP investigator. Clauses 45 to 47 remove the need for that duplication, both allowing local authorities to conduct investigations and freeing up time and resources for other investigations. Clause 48 extends the period covered by the ““two strikes”” rule from three years to five. That means that, if a person commits a benefit offence within five years of a previous benefit fraud conviction, benefit may be withdrawn or reduced for 13 weeks. Extending ““two strikes”” builds on the positive deterrent effect already shown by the current regime and is a central part of our strategy to reduce fraud in the benefits system. Part 4 comprises a series of smaller measures correcting some of the anomalies in the benefit system. These include measures to ensure that disability living allowance recipients at the age of 16 do not lose out on three months’ benefit entitlement, as well as amendments to simplify the budgeting loan scheme, which provides support to the most vulnerable in society. The broad consensus that the Bill has received in its passage so far reflects the fact that it is founded on shared values: values of opportunity for all; the contract between the citizen and the state; andthe fundamental importance of work. It extends the opportunities that participation in the labour market can offer to people who had previously been denied that chance. It enshrines rights and responsibilities within the structure of the benefit system, and it provides the legal framework through which a real difference can be made to people’s lives. I firmly believe that, if we are to meet the challenges ahead, break down the remaining barriers to work and successfully tackle poverty and social exclusion, this Bill is the right way forward. I commend it to the House. Moved, That the Bill be now read a second time.—(Lord McKenzie of Luton.)