Welfare Reform Bill

My Lords, I shall also speak to Amendment 104AA. In Clause 113, we see the Government’s intention to introduce a civil penalty for negligence in providing incorrect statements for all categories of universal credit claimants. The penalty will also apply to the failure to disclose information. This is a probing amendment to understand why and how these penalty powers will be applied. The civil penalty will be awarded where an error is not being dealt with through fraud action. The power to award will not be restricted to the Secretary of State but given to any authority that administers housing or council tax benefits, so it is quite a significant power. Although there is an existing tax credit civil penalty regime, such a principle will now be extended to all universal credit claimant communities, many of whom are very vulnerable, such as those with disabilities or illness. What exactly is the offence and how will it impact on the population of claimants? In response to a question from my noble friend Lady Hollis and me, the department has kindly advised that ““negligence”” should be construed in accordance with the everyday meaning of the word: that is, not exercising the care that the circumstances demand—in this context, being careless about, or paying insufficient attention to, the accuracy of any statement or information given in a benefit claim. Not exercising care and not paying sufficient attention are not actions that can be assessed for negligence without having regard to the capacity and the capability of the individual when providing that information. More than 4.2 million adults lack the basic, day-to-day competences of functional literacy, 6.8 million adults lack functional numeracy, and I understand that it is estimated that two-thirds of claimants on income-related JSA have the functional literacy of an 11 year-old. There will therefore clearly be a higher concentration of adults with limited numeracy and literacy skills in the claimant population. As I have said, many claimants will also be vulnerable for other reasons—disability, illness or whatever. All these characteristics add up to a greater propensity for errors to occur and mean that the most vulnerable will be disproportionately hit by the civil penalty. However, my arguments do not stop there. The Government are assuming that 80 per cent of claimants for universal credit will fill in their application forms online, but evidence from charities suggests that a much lower number will be able to do so without error; a more realistic figure may well be 40 per cent. What plans will the department put in place in the event that it becomes clear that the percentage of applicants who can fill in their forms online is significantly below that forecast? Universal credit will also bring a new set of rules and people will not always understand what is expected of them. People have complicated lives, and even if someone is sitting next to them they may still get it wrong. Even when individuals want to get it right but are not competent, cuts to the funding for legal advice and the winding down of the local authority-based benefit services will mean that those who would otherwise have helped the claimant to fill in the form will not be there. Claimants may want help from face-to-face contact at Jobcentre Plus, but many centres are being closed and they are likely to be in urban areas and so they are remote from rural claimants. Yes, call centre staff will be available, but they may not be sufficiently experienced in the new rules, certainly in the early years of universal credit, and their guidance may lead to errors in the filling in of the form. We have layer upon layer of capacity, capability and complexity considerations that, once added together, reveal why non-fraudulent errors will occur in statements and information provided by vulnerable claimants. This indicates a systemic series of reasons for errors that will not be addressed by exhorting the most vulnerable to be more personally responsible and hitting them with civil penalties. The most vulnerable claimants are often scared of filling in their forms, but now we have the potential to make them petrified. One can imagine their anxiety at receiving some heavy handed departmental letter telling them that they are about to be fined. Their ability to know that it is a civil penalty rather than a criminal one may be a subtlety that misses them when they receive such a letter. Let me ask the Minister three questions. First, can he give an assurance that civil penalties will not be introduced before transparent criteria are set out to ensure that claimants are not penalised for making innocent errors and failing to understand the need to report changes within a required timetable, and that definitions of ““reasonable excuse”” will take account of a claimant’s individual circumstances? Secondly, how will decisions about when to issue a civil penalty be made, and how and when will good cause be considered? Thirdly, how does the Minister expect to ensure that the most vulnerable and the most prone to make errors will not be unfairly penalised by the civil penalty—not the exhortation that the most vulnerable will not be hit but how he expects to ensure that that exhortation is met? The reason given for the extension of the civil penalty power is to reduce claimant error and increase personal responsibility. The savings from introducing the civil penalty power will be £19 million over the three years to 2014-15, but the application of that power could have a considerable impact on some very vulnerable people. I understand that the Government’s estimate of the volume of civil penalties is just under 600,000 a year, which seems very high given that, first, universal credit is intended to be a simpler, more transparent system; secondly, that the number of penalties for tax credit claimants last year was, I understand, 1,221; and, thirdly, that there were 7,249 administrative penalties for the benefits service. That leaves me concerned as to how these civil penalty powers will be used in practice, because in the impact assessment, fraudulent and criminal activity is lumped together with non-fraudulent and non-culpable—or potentially non-culpable—error. However, they are clearly not the same thing. The same community of people is not being addressed, but they are being considered in an almost holistic way in the impact assessment. It worries me that the department appears to be applying a common mindset to both, which in part is my reason for tabling Amendment 104AA, which seeks to prevent the Secretary of State allowing any targets to be set that would prove an incentive to increase both the number and the value of civil penalties issued. The stated purpose of these civil penalties is to improve claimant personal responsibility. However, we know over time from our own common sense and experience that organisational cultures can result in such penalty powers being abused for reasons other than their original purpose. The punitive intention increases, or they become an opportunity to raise money. In a world where there is increasing competition for access to tax revenues, civil penalty powers will be vulnerable to abuse. They could end up being deployed more aggressively to improve revenues or to be punitive. One can think of examples of where ordinary people think that this may have happened. For example, are the approaches to catching people speeding and the margin of tolerance over the speed limit determined by a desire to incentivise good behaviour and avoid bad, or has it become a means of raising revenue? Did some local authorities deploy surveillance techniques against ordinary citizens for reasons never intended by legislation? Whatever the validity of people’s thoughts on these matters, they are an indication of concerns as to how civil penalty powers can be deployed in a way that was never intended. I would prefer the civil penalty not to be there, but certainly I want to ensure that the powers to impose civil penalties set out in Clause 113 of the Bill are never abused. The recipients of that abuse are most likely to be vulnerable people who easily make mistakes, and who could come to fear the department’s staff as a sort of form of police force that is free to hand out fixed civil penalties at will. Any targets set would almost certainly be set by reference to national standards, and this amendment seeks to prevent the Secretary of State from ever allowing such standards to be set. The population does not conform to national standards. There are differences in localities, in regions, in demographics, in educational attainment, language skills, level of employment, labour market characteristics, which all have an impact on the volume of forms likely to be completed incorrectly. There will be a concentration of impact from these civil penalties if targets are applied. In summary, I am a strong believer in public service and support, but I have a great antipathy to the deployment of bureaucratic power that frightens or abuses people. I have real concerns about the deployment of this civil penalty and I look forward to the Minister’s response to my questions.