Welfare Reform Bill

My Lords, back in 1997, those of us campaigning for the poor usually did so by campaigning for higher benefits, until one calculated that if one raised every benefit by about £10 a week—which would have bought a couple of yoghurts a day and a cinema ticket at the end of the week—that would have equated to the entire spending then on the hospital service, and people would still be poor. They would still passively receive the dole, generation after generation. Since 1997, a dozen or so social security Bills later, we have instead been building up an active concept of welfare that is focused on work, to address not just income poverty but, as has been movingly said by other contributors today, the poverty of self-esteem of those on, and who regard themselves as being on, the edges of our society. We have come a long way since 1997. Under a remarkable Chancellor, we have seen a steady and expanding economy, with another 2.5 million jobs. We have seen those jobs pay, through a minimum wage, tax credits and childcare support. We also know, though, that labour market policies are essential as well. We know that if youngsters leaving school at 16 have not had a job by 21, they will have become virtually unemployable, and that someone on disability benefit spends their first 12 months anxious to get back to work and subsequent years anxious to remain unthreatened while they remain on benefits. We know that the lone parent who stays on income support until their youngest child is 16 moves at that point not back into work, as we would hope, but almost always on to another benefit. Those labour market policies are the subject of the Bill. For those who have been active—the problem now for all of us is inactivity, not unemployment—the labour market seems full of risk. It is about those risks that I want to talk tonight. Some have already been mentioned. Pressed to enter, many economically inactive people will become reluctant conscripts, engaging, I fear, with reluctant employers. What are those risks, and to what extent does the Bill seek to address them? The first cluster of risks are the benefit traps. I shall touch on some of them. We know that the best predictor of whether, for example, a lone parent has a job this year is whether last year they had a mini-job. Yet, if she takes a mini-job, we punish her for it. Every hour she works after three hours, until she hits 16 hours, she loses her benefit100 per cent, pound for pound. Surely that is not sensible. It is an invitation to build fraud into the system. We need dials, not dichotomies. We need a properly tapered earnings disregard—in the same way, I suggest, we also need a review of the permitted earnings rule for disabled people—if we are to coax the inactive back into the labour market so that their confidence grows step by step. Even worse, when people find work, they face a steep withdrawal of housing benefit and a tax of 60p in the pound on top of all their other taxes, and then if the job folds it will take them weeks to get back on to housing benefit, so that to the financial risk of losing a job and means-testing is added the potential risk of homelessness. The four-week rollover helps, but it is still not enough. I hope that the Bill’s new housing allowance offers the possibility not only of shopping around—although I remain somewhat sceptical of that, given that something like 40 per cent of those on housing benefit have to use their benefit to top up an incomplete and inadequate housing benefit because of the recalcitrance in many areas of rent officers—but maybe of housing choice. More importantly, as my noble friend said in his opening speech, it will allow predictability, speed and simplicity. We have also, with the best of intentions, built another risk into disability benefits. Incapacity benefit increases in value the longer you are on it. There are perfectly good reasons for that: over time you need to replace white goods, carpets and so on, which a person on JSA—80 per cent come off it within six months—would never normally need to do. However, that seems to produce a reward for not coming offthe benefit. More importantly, it produces a high perceived risk that, if you come off the benefit and then your health or your job collapses, you go down the snake of benefit reduction and have to start all over again at the lowest rate. That is why over recent years we have extended the linking periods—up to two years now, I believe—to absorb that very real risk, and why I am so pleased that those in the support group in the Bill will get a higher rate within 13 weeks, not 26, while any false incentive for those who might work not to do so is removed. We know that means-testing encourages fraud. It also multiplies the risk of error. Again, the simplification of benefits in the Bill and the sharing of information, as well as the firm line on fraud, will, I hope, diminish those risks. So there is a cluster of risks around the structure of benefits and its income-related forms. The second set of risks I want to suggest tonight are around the work-focused interviews. Many benefit recipients have become economically inactive for good reasons—poor physical and mental health, functional illiteracy, weak language skills or exhausting caring responsibilities—and may end up without a qualification, a skill, a driving licence or a reference to their name. Work they might have attempted in the past—the classic job was always that of lift attendant—has been increasingly squeezed out of the economy. Many are a long way away from today’s world of work. We could invest many pounds and many hours, and they would still not find work. Under any value-for-money scenario that is going to be troublesome, but try we must. If the funding for outsourced contracts rewards outcome-based results, however, how much work will go into supporting and sustaining such people when other clients are easier and quicker to place? Can we hope that my noble friend will be able to assure us that more generous support funding will be put in place? Even if, with all this additional work, someone is not helped back into the labour market, they may none the less in the process have been able to become a better parent and a better member of society, able perhaps to do part-time work or volunteer. New Deals have been transforming here. I am delighted that Pathways to Work will be rolled out nationwide over the next 18 months or so. The IFS has shown that it is beneficial for the older worker, that the New Deal for the over-50s has supported something like 160,000 people back into work since 2000, and that of those on incapacity benefit nearly 10 per cent more are in work nearly 12 months after Pathways—a significant finding. We are right to concentrate on those entering IB before they have become dependent on their benefits and while they are still attached to the labour market. If there is one thing I have learnt about disability benefits, it is that early intervention is vital. But, as another noble Lord has said tonight, our record on occupational rehabilitation is among the poorest in Europe, and that has to be improved. It is much easier to hold someone in work than to bring them back into work a year or two down the line. That brings me to the next risk, which has also already been mentioned. I refer to conditionality, compulsory work-focused interviews, the sanctioning of benefits, and the like. Unlike other noble Lords, including the noble Baroness, Lady Thomas, I thinkit is essential. In the early New Deals we quickly found that what was not mandatory was too often ignored. Each time the Government introduced sanctions in social security, worries were rightly expressed about the quality of staff and their decision-making. The fear was that too many people would be sanctioned. Would staff understand the effects of cancer treatment, dyslexia, of having a sick child or of agoraphobia? As evidence that staff do not understand, it has often been said, and it has been repeated tonight, that half of all IB refusals were overturned on appeal. That fear was expressed tonight by the noble Lord, Lord Oakeshott. I believe this to be a misunderstanding. Although most New Deal programmes deal with thousands of people, the number of sanctions in most of them can be counted on the fingers of a couple of hands. In my experience, staff are almost entirely sensible and decent about missed interviews for health reasons, caring crises and the like. They are not traffic wardens, rewarded for the number of benefits they refuse or sanctions they impose. We should not assume that that is what they are there to do. The point about conditionality is that people do not know what they do not know. If they do not attend work-focused interviews, they will not know about the possibility of rehab, of job search techniques, practical help with aids and appliances, such as the access to work programmes, and the effect on family finances. After all, one person in six who is on IB has dependent children. Perhaps two-thirds of those coming on to IB will be in the support group, and of the third in the employment group, perhaps a third of those will be screened out to join the support group, but if we can reduce those risks, many of those in the support group may want to try to return to work, even if only on a part-time basis. As for those going to appeal—often used as evidence that the staff have got it wrong—perhaps50 per cent to 60 per cent of DLA appeals are overturned, which is about 5 per cent of the total IB caseload. As the president of the appeals tribunal has indicated, appeals are usually overturned on the basis of incomplete evidence, the problems of a fluctuating condition—very difficult for any decision-making—and, sadly, a deteriorating condition. What is key is to get it right as far as humanly possible at the early decision-making stages and to review that decision as new and more complete information becomes available before moving into the tribunal system. This brings me to my final risk: the attitude of the employer, especially those in small and medium-sized enterprises, mentioned by the noble Lords, Lord Skelmersdale and Lord Oakeshott. Employers, particularly SMEs, understandably want hassle-free, reliable staff. They cannot easily cover unexpected absences—the woman with the disabled child, for example—and they dread entanglement in the tribunal system. Some 38 per cent of employers are unwilling to employ a disabled person and two-thirds are unwilling to employ someone with a mental health problem, yet 40 per cent of those on IB have a mental health problem or a learning disability. What can employers respond to when someone has fluctuating mental health or if they are presented with someone who has Asperger’s syndrome and may have weak social skills? The Richmond community owns jobs collectively—with Boots, say—and the job gets done by someone in the commune. That seems a very positive way forward. Mentoring has had superb results, but we must think outside the box more than we have conventionally done. We know that the best hope of employment for someone with a disability lies with re-employment by the previous employer, who sees beyond the medical record to the person they knew before. I wonder whether we were wise to abandon the employment credit for employers. Can we give greater help to those former employers, as they are the ones most likely to hang on in and make the job sustainable? We have come a long way: there are 2.5 million more people in work and 1 million fewer on benefits, while 2 million pensioners and 2 million children have been lifted out of poverty. I greatly welcome the Bill and am confident that my noble friend will give us the assurances that we seek. If we can get it right, I believe that it will offer renewed life chances that could be transforming for those too easily written off in the past.