INCAPACITY BENEFIT: RATE

HC Deb 21 June 1994 vol 245 cc134-43

Lords amendment: No. 1, in page 2, line 30, leave out from beginning to ("is") in line 32 and insert— ("(2) Subject to the following provisions of this section, the weekly rate of short-term incapacity benefit")

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The Minister for Social Security and Disabled People (Mr. Nicholas Scott)

I beg to move, That this House doth agree with the Lords in the said amendment.

Madam Speaker

With this it will be convenient to take Lords amendments Nos. 2 and 3, Lords amendment No. 4, Government amendments (a) and (b) thereto, and Lords amendments Nos. 5, 6, 11 and 12.

Mr. Scott

During the passage of the Bill there has been a genuine and widespread anxiety about the level of short-term incapacity benefit for three vulnerable groups—the terminally ill, people with severe disabilities and people with children. The Government have given careful consideration to the position of all three of those groups and as a result these amendments make several important changes to the rates of incapacity benefit.

We remain convinced that 52 weeks is an appropriate qualifying period for the highest rate of benefit. We recognise that those people who proposed the disability living allowance element of Lords amendment No. 4 have been motivated by the desire to give extra help to the most severely disabled people. Incapacity benefit is an income-related benefit and not designed to meet the extra costs of disability. However, the Government have reflected on the views that have been expressed about that group and I am pleased to accept that the long-term, highest rate of incapacity benefit should be brought forward to the 29th week of incapacity for claimants receiving the highest rate care component of disability living allowance.

I am proposing two minor, technical amendments to amendment No. 4 to clarify that policy intention. The first removes redundant words and the second replaces "higher" with "highest", which is the correct legal definition of the maximum rate of DLA care component.

Following helpful discussions in the Commons Standing Committee, my noble Friend the Parliamentary Under-Secretary of State announced our intention to bring forward the long-term rate of incapacity benefit for claimants who are terminally ill to the 29th week of incapacity for work, and amendments Nos. 1 to 4 make that provision.

Anxieties have also been expressed about the position of children under the new benefit. Amendments were passed in another place which bring forward payment of child dependency increases to the 29th week of incapacity. I have reconsidered provision for children and agree that, in those limited circumstances, child dependency increases should also be paid from the 29th week. For a family with two children, amendments Nos. 5 and 6 will mean nearly £500 extra during the first year of incapacity.

I hope that the amendments will be widely welcomed.

Mr. Keith Bradley (Manchester, Withington)

We welcome the fact that the Government have accepted the Lords amendments. It is a great tribute to the all-party work that was undertaken in the other place that the amendments were successfully concluded. I pay tribute to the work undertaken in the other place. We must also reflect on the fact that the Labour party, in Committee and during the Bill's other stages, strongly pressed the issues raised in the amendments. I welcome the fact that the Government have now accepted the need to introduce and support the measures, particularly the higher rate of disability living allowance and the addition for children.

It would be remiss of me not to make some general points about the context in which the Lords amendments were accepted by the Government. I shall remind the House of the Bill's purpose. As we know, it comes into effect in April 1995 and will have two general effects on people who are sick or disabled in future. First, it will reduce the number eligible for benefit through the introduction of a more stringent test of incapacity and the abolition of access to benefit for people with industrial injuries. When people have got through the hoop of the new, stringent medical test, those entitled to the benefit will have it paid at a lower rate than the current invalidity benefit and will have to wait a full year before reaching maximum entitlement to the new benefit.

It is important to view the amendments from the other place in the context of the overall changes and level of benefit that will be paid to sick and disabled people. The Lords amendments have been introduced against a background of deteriorating living standards for disabled people, including the imposition of value added tax on fuel without adequate compensation for disabled people for the cost of that additional fuel bill, and the abolition of vehicle excise duty for disabled passengers.

To date, only one fifth of the independent living fund—the mechanism to help disabled people—has been spent. We have to view the attack on the living standards of disabled people in that context. It would be wrong of me not to flag up yet again the general attack on the rights of disabled people that took place when the Government did not accept the private Member's Bill on anti-discrimination.

The amendments are clearly to be welcomed, but they must be seen in the context of the overall lower level of benefit. There are three main provisions to reduce the level of benefit payable to claimants after April 1995. I do not want there to be any misunderstanding at a later stage, particularly on the part of Conservative Members, on exactly what effect the Bill will have on those claimants who successfully negotiate the new medical text.

The provisions will reduce the level of benefit because of the changes to the additional pension—the extra amount on top of the basic benefit payable on national insurance contributions paid between 1978 and 1990. It is payable to 85 per cent. of invalidity benefit payments and is worth, on average, £13.40 per claimant. That was stated in Hansard on 7 February 1994 at column 210. It is being abolished for new claimants and frozen for people already on invalidity benefit, who are covered by transitional protection. That abolition is part of the package of cuts that the Government are making for disabled people who need the benefit to protect their living standards.

Despite the Government's arguments that the additional pension duplicates occupational pensions and other sources, official statistics show that fewer than four in 10 invalidity benefit claimants have occupational pensions, whereas more than eight in 10 receive an additional pension. Research by groups such as Disability Alliance and the Disablement Income Group shows that the people most likely to need invalidity benefit are those least likely to have access to payments from an employer or a private insurance company.

It is important to pay tribute to all the disability groups and organisations which have worked so assiduously to consider carefully all the implications of the benefit and the tremendous amount of work they have put in to ensure that hon. Members on both sides of the House and all parties are well informed about the implications of the legislation, so yet again there can be no claim of misunderstanding when the legislation becomes law in April 1995.

The second significant change to the rate of benefits covered by the group of amendments is the adult dependants' allowances. These will be restricted to non-working partners who are looking after children or are aged over 60. Few claimants now receive an allowance under these circumstances—only 170,000, or fewer than 12 per cent. of claimants. The figures are at column 804 of Hansard for 20 January 1994.

Those particularly affected by the loss of the addition are likely to be older claimants in their fifties whose children have left home. It has been estimated as £15 million in 1995–96 and £40 million in 1996–97—a very small sum of money.

An amendment to reintroduce the adult addition to the benefit was introduced in the other place with all-party support and lost by only three votes. Even at this late stage, I urge the Government to reconsider that element of the benefit to see whether there is any way in which the adult addition can be brought back, in the same way as the children's allowance has, to ensure that the particular group of people who require the benefit are properly protected. The Government won the vote by a very small margin in the other place and because of the closeness and the all-party nature of the support for the amendment it is essential that the Government should look at it again.

The third element that I wish to highlight is the age allowances. The age banding will be altered so that people over 45 will no longer receive any additional help. At present, an increase in benefit is payable up to age 60 for men and 55 for women. Despite amendments to pay additions for people up to age 60, provisions for age allowances in the Bill remain intact. Again, this represents a loss of £3.80 a week for the over-45s and is part of the overall package of cuts that the Government are making through these measures to the rate of entitlement for people who have successfully negotiated the medical test.

The Bill contains a fundamental redefinition of long-term incapacity from 28 weeks to 52 weeks. No explanation is given for the change, apart from the well-worn phrase that 52 weeks is a more reasonable definition. The real reason may be more that it will save the Government significant sums of money than any rational understanding or real evidence of what long-term incapacity actually means.

As was pointed out in the other place, with the test of incapacity taking place after 28 weeks, someone will be considered incapable of all work and yet will have to wait another 24 weeks before full payment is payable. As entitlement to the highest basic rate of benefit and other increases is triggered by the start of a long-term incapacity, delaying full benefit until after a year of incapacity represents the hardest cut of all.

The targeting of people who have passed the test and are therefore considered genuine—according to the Government's definition—followed by a delay in full entitlement has been the subject of numerous amendments in both Houses, and of numerous protracted, detailed debates. An all-party amendment to reinstate long-term incapacity benefit at 28 weeks was also narrowly lost in the other place, by a mere two votes. I urge the Government to reflect again on the closeness of that result, and to consider reinstating the full rate at 28 weeks rather than delaying payment until 52 weeks have elapsed.

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The elements that will be delayed until after a year are the basic rate of benefit, which means a loss of £5.10 per week per claimant between weeks 29 and 52; the full rate of adult dependency increases, which means a loss of £7.60 per week per claimant with a qualifying partner for weeks 29 to 52; and age allowances, which means a loss of £12.50 per week for those under 65 and of £6.10 per week for those aged 35 to 45. Those are significant amounts. Conservative Members—who will receive a flood of letters and visitors to their surgeries, asking why cuts have been made in benefit for those who have passed the medical test—should bear in mind the fact that the Opposition have made the consequences of the legislation absolutely clear: they cannot give the excuse that they did not know or understand its implications.

We welcome the three amendments dealing with disability living allowance, the terminally ill and children's additions. Two amendments have not been selected and I therefore do not intend to speak about them; but we could have had an interesting debate on entitling not only the terminally ill and those on the higher rate of DLA, but those who have been diagnosed to be suffering from a prescribed disease or disability, to benefit at 28 weeks—a system of "fast-tracking".

I am sorry that we have not been able to debate the Lords amendment that would complete the task of awarding benefit at 28 weeks rather than 52 to groups which will be exempt from the functional element of the new incapacity test. We wanted to bring them into line; although that clearly will not be possible, I urge the Minister to consider that last element again.

The terminally ill are, as it were, on the outside lane of a three-lane motorway, moving towards the 28 weeks on the fast track. The Government have now accepted the higher care component for DLA in the centre lane, but the inside lane should also keep pace with the traffic flow: that is, those with prescribed diseases should be included on the fast track. They are not only on the same motorway, but are travelling only for what could be described as the extra 24 "miles".

I believe that the cost of fast-tracking those people to 28 weeks so that they need not wait for 52 would be extremely small and that it would be far neater for the legislation to bring all three components together on the fast track rather than retaining the anomaly of a group being left outside it, which is likely to lead to much confusion, concern and anger among those who have been exempted from the functional test but are not being allowed the full rate of benefit until 52 weeks have passed. I urge the Minister, therefore, to consider the amendments on those matters, although I accept that we shall not debate or vote on them today.

The Government accept the Lords amendments, which result from the excellent work that was undertaken in the other place, but I urge the Minister to consider not only the overall impact that the Bill will have on disabled people but the smaller issues that I identified to see whether, when the regulations are introduced, we can make a little more progress. I know that he is constrained by the pressures that the Treasury has placed on the Department of Social Security, but that is not a good enough reason for not protecting disabled people and ensuring that their income does not suffer as a result of the Bill.

We welcome the changes and we commend the work that the other place undertook in support of the changes.

Mr. Alan Howarth (Stratford-on-Avon)

I am glad that the Government intend to accept the purposes of the amendments passed in another place with all-party support. They will help the most severely disabled people and households of the sick and disabled where there are children. The Government's response has been decent and in keeping with the moral concern and seriousness with which Ministers consistently approach their responsibility in social policy.

Some people criticise my right hon. Friend the Secretary of State for confronting us with the realities of what is happening in our society and with the choices that we have to make, but that is his duty. He performs it courageously, and he is right to insist that we think carefully about the implications of where our instincts and impulses lead us. He has tempered rigour here, however, with flexible common sense, which is characteristic and welcome.

An amendment was debated in the House of Lords that would have provided that benefit should be payable after 28 weeks instead of a year to adult dependants, notably spouses as well as children. In circumstances of invalidity, spouses and partners are carers, and we should do more to support them, but the Government were unable to accept that amendment.

Another more ambitious, more costly but justified amendment would have provided that incapacity benefit would be paid at the long-term rate to all claimants who passed the new medical test after 28 weeks instead of after a year. That too was found unacceptable. I cannot understand the case for requiring claimants to undergo a stringent medical test at six months and then to wait 12 months for incapacity benefit. If need is demonstrated, it should be met. The only argument for making them wait—often, I fear, in indigence—is one of economy, but this is the wrong area in which to make economies.

It is good that the Government accept these amendments and provide fast tracking for the terminally ill, and for those on the higher rate component of disability living allowance—the most severely disabled people—to go on to the long-term rate of incapacity benefit after 28 weeks. Happily, they will not be required to undergo the new medical test.

The new medical test of incapacity is central to the Bill and to a number of the amendments. Debate in both Houses has not resulted in much meeting of minds or in any apparent accommodation by the Government of the powerful criticisms that have been made.

The very concept of an objective medical test of incapacity is unsustainable. I said that on Second Reading, and I have not changed my view. The capacity of a person for work is not susceptible to the kind of objective assessment that the Government hope will be made. We are talking about the interaction of the infinite variety of people with the infinite variety of their circumstances. An individual's medical, intellectual, educational, familial, social and economic circumstances will all have an important bearing on his or her capacity to do a particular job. Generally, one cannot say that someone is either absolutely capable, or absolutely incapable, of work.

I understand why the Government want objectivity, and why they want to get away from subjectivity and discretion. They wanted to do so with child support, as well as with invalidity benefit. Not only Treasury Ministers but my right hon. Friend the Secretary of State for Social Security, who always seeks to be far-sighted and responsible in that field—he controls the largest budget in Whitehall, so that is just as well—fear, with some justification, that discretion will lead to loss of control over expenditure. However, economic discipline should serve our social objectives, not the other way around.

The objectivity that the Government seek in this context is a chimera, whose pursuit distances us from the responsibility that we should not evade, and in the end cannot evade, to make judgments about personal arid social needs in the variety of their manifestations, and to decide collectively how to respond to them.

Among the needs to which we should address ourselves are those of men in middle age who can no longer find opportunities in the labour market. As I explained on Second Reading, invalidity benefit has played a crucial part in dealing with those needs. The amendment to allow benefit to be paid earlier for such men's children will be helpful to a number of them.

Dr. Jonathan Wadsworth of the London School of Economics has studied what is happening to those people. The number of men between 35 and 65 years old newly categorised as economically inactive—that is defined as not looking, and not available, for work—grew by 110,000 between the winter of 1992 and the winter of 1993, while unemployment overall was falling. Many of those unemployed men have children, and Lords amendments Nos. 5 and 6 are of great relevance to that category.

We should be even more especially concerned for the sub-set within that category, consisting of men in the age group 55 to 64—although, in concentrating on men, I do not mean to decry the needs of women.

In that cohort of men, unemployment rose by 23 per cent. between 1986 and 1993, while inactivity rose by 20 per cent. Meanwhile, a greater number of new claimants of invalidity benefit were unemployed, and claimants were staying on invalidity benefit for longer, often much longer. There are strong correlations between areas of high unemployment and areas of long-term sickness, and also between relatively low levels of skills and long-term sickness. Invalidity benefit has been providing succour for many long-term unemployed people, and for many who have come to despair of the possibility of being employed.

Some of my hon. Friends say that there must be abuse, and that we cannot possibly afford that racket, so the Government are right drastically to reduce eligibility for the new incapacity benefit. To them, and to my right hon. Friends, I say two things. First, as I said on Second Reading, the DSS's own research, as well as other analyses available, have failed to demonstrate significant abuse.

Secondly, there remains a problem that demands a constructive response from us. There is a significant and rising number of unemployed people who have no good prospects in the labour market, who had low earnings when they were in work, and who have few savings and exiguous pension prospects. I submit that those people have a legitimate claim on us. They are the casualties of an economic restructuring which could not have been avoided, and which the Government have strongly endorsed and promoted.

With amendments Nos. 5 and 6, the Government have helped those people in relation to their children, but beyond that the Government's response to their needs so far, as I understand it, is to say that, in future, it will be much harder for them to qualify for incapacity benefit, and that, furthermore, they will have to seek work with extra intensity in a labour market that is bitterly inhospitable to them, or they will not be eligible for the job seeker's allowance. Whatever the merits of incapacity benefit and the job seeker's allowance, they will not be a sufficient response on the part of society to this clearly identifiable social need. I suggest that there is food for thought for all the parties here.

I have detained the House longer than may be customary or convenient on Lords amendments, particularly when the Government are showing some generosity in their response to them. I offer the excuse that, in this House and among the wider public, debate on this massively important measure, through which the Government expect to save £1.5 billion a year, has been perfunctory. We should be grateful to the other place, where there were admirable debates. Not for the first time, the peers showed themselves to be closer to the people than the Commons was.

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Dr. Norman A. Godman (Greenock and Port Glasgow)

The hon. Member for Stratford-on-Avon (Mr. Howarth) referred to the Government's generosity. I hope that I receive a generous response to a number of my concerns about the Bill. I remind the Minister that, in the excellent notes provided by his Department, page 2 of the explanatory memorandum on the Lords amendments mentions claimants who are over pension age. I seek assurances from the Minister. He may not be able to give them to me now, but I hope that, by way of a signal, non-verbal or otherwise, he will promise to write to me. My questions relate directly to the Lords amendments.

I am concerned about women aged 60 to 65 who have had their invalidity benefit suspended until the European Court of Justice offers an opinion on the referral made by the Department and by counsel representing Mrs. Rose Graham at the English Court of Appeal. That referral was made four or five months ago. Given the backlog of work that the 13 judges in Luxembourg face, a decision may not be reached for another 18 months, yet the measure will come into effect next year.

Can the Minister assure me that the thousands of women who are directly affected by the Graham case—I refer here to the decision made by Commissioner Skinner three years ago, involving Mrs. Graham of Birkenhead—will not have to face further hurdles even though a decision will not be made by the European Court of Justice for at least 18 months?

There are several hundred such women in my constituency alone, and in Northern Ireland more than 3,000 such women have made applications for the benefit to be paid to them. I reckon that about 80,000 women must be trapped by the lengthy process gone through by the European Court of Justice in reaching an opinion on such referrals. I do not criticise the court too harshly; it has an enormous work load. I visited the court last year and spoke to some of the judges. I am fairly confident that I am correct when I say that an opinion will not be offered on Mrs. Graham's case in particular and on the 80,000 women generally for at least another 18 months.

I seek an assurance from the Minister. I sincerely hope that the women will not have to undergo a new medical test. It is not their fault that they are suffering in this way. Commissioner Skinner decreed that the Government were contravening a European directive passed as long ago as 1979—or was it 1977? I do not have notes to hand. Those women should be paid that benefit until the Supreme Court makes its decision. I say that it is its opinion, but, in every sense of the word, it will make a judgment on Commissioner Skinner's decision, and the referral by the Department of Social Security and Mrs. Graham's counsel. I seek an assurance that there will be no new medical test.

In the interim period—it is not an interim period for the women concerned, many of whom are suffering hardship—I would also like to know about the guidelines issued to local Benefits Agency offices in respect of appeals made on the basis of hardship. If the Minister cannot answer me now, would he write to me?

Lord Henley told me in a letter some 18 months ago that a woman caught up in those circumstances may appeal to have her invalidity benefit restored on the basis of the hardship that she is suffering. I know from a written answer that some 770 women have been paid on the basis of hardship, but some offices—perhaps one of them is the office in Greenock—have an over-harsh list of criteria defining hardship.

Will the Minister and his officials look again at what those criteria mean? What is their definition of hardship? We are talking about 80,000 women who, through no fault of their own, are being made to suffer because the Government are challenging that Commissioner's decision all the way to Luxembourg. The Government are at fault in not paying invalidity benefit to women aged 60 to 65. Let us not forget that it is a contributory benefit, not a non-contributory benefit.

In returning to the idea of generosity, the Government should be paying those women invalidity benefit until the day that the European Court of Justice offers the English Court of Appeal its opinion. I am fairly confident that those 13 judges—by then, there may be 14, 15 or 16 judges in that Supreme European Court—will say that Commissioner Skinner was right and that the Government were wrong.

I am therefore seeking assurances about those women, but, above all, the Minister should show some generosity of spirit by ensuring that they are paid. If not, I ask him to reconsider the criteria that his officials in the Benefits Agency local offices use to define hardship. Those criteria are over-harsh, and they penalise women on very low incomes.

Mr. Scott

It would be best if I wrote to the hon. Member for Greenock and Port Glasgow (Dr. Godman) to cover the various points that he has set out. He will understand that I am especially sensitive to any danger of misleading the House in response to an intervention. However, I can tell him at the moment—I may want to embellish the explanation in the letter to him—that the case of a person whose benefit has been suspended pending the Graham case and who makes representation to the Secretary of State in cases of hardship will be considered sympathetically.

A number of the women concerned have had the reinstatement of their benefit in those circumstances. Bearing in mind that the points raised by the hon. Gentleman are strictly outside the scope of our discussions, it would be better if I sent him a considered response on those matters.

The fact that a number of the hon. Gentleman's points are outside the scope of the Lords amendments may be characteristic of other speeches—if I may say so without in any way criticising your control of the House, Mr. Deputy Speaker. As a result of my response to discussions in another place and to representations which were made during the Commons consideration earlier, I hope that it has been possible for those who have spoken to welcome the changes which flow from the amendments. I recognise that there will always be pressure for the Government to go further and faster than they feel possible.

The hon. Member for Manchester, Withington (Mr. Bradley) referred to additional pensions. It is worth reminding the hon. Gentleman that, if we had not tackled the issue of additional pensions in the Bill, by the end of the century we would be talking about a cost to the taxpayer of additional pensions of £2 billion a year. Even the hon. Member for Glasgow, Garscadden (Mr. Dewar) said that he thought that the existence of additional pensions in today's social security system was, to use his phrase, a bit of an anomaly. I certainly share that view.

Points were also made about the adult dependency increase. It is worth making it clear that the adult dependency increase is not being abolished. It is being focused on those groups which are unlikely to be economically active and are therefore in the greatest need. It is not right that ADIs, which were introduced in 1948, should remain for ever untouched by the social changes that have occurred in the intervening period. I believe that our judgment about that matter is correct.

My hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) referred to exemption from medical tests. That subject stretches the boundaries of our discussion on Lords amendment No. 1. However, the medical test is designed for one purpose, and that is to decide whether people can be passported on to the benefit. While people who have experienced certain conditions can be exempted from the medical test, it is a completely different proposition to say that if someone has a particular medical condition, the severity of that condition should be regarded as a passport to incapacity benefit.

Passporting makes sense where a condition is specific and easily recognised. However, it is not a measure, in any sense of the word, of the severity of a condition. In using the higher rate of DLA as the passport to the benefit, we are seeking to limit and to focus that particular arrangement on the most severely handicapped.

I hope that, with that brief response to the points that have been raised, I can welcome the guarded and somewhat limited welcome which has been given to this group of amendments. I certainly believe that they will be welcomed outside the House.

Question put and agreed to.

Lords amendments Nos. 2 and 3 agreed to.

Lords amendment: No. 4, in page 3, line 5, at end insert— ("(3A) In the case of a person who has been entitled to short-term incapacity benefit for 196 days or more in any period of incapacity for work and is terminally ill, or, if he is in receipt of the higher rate of the care component of disability living allowance, the weekly rate of short-term incapacity benefit payable, if greater than the rate otherwise payable to him under subsection (2) or (3) above, shall be equal to the rate at which long-term incapacity benefit under section 30A above would be payable to him if he were entitled to it. For the purposes of this subsection a person is terminally ill if he suffers from a progressive disease and his death in consequence of that disease can reasonably be expected within 6 months. (3B) References to short-term incapacity benefit at the higher rate shall be construed as including short-term incapacity benefit payable to any person who has been entitled to that benefit for 196 days or more in a period of incapacity for work, notwithstanding that the rate of benefit is determined in accordance with subsection (3) or (3A) above.")

Amendments made to the Lords amendment: (a), in line 4, after "and" insert "—(a)"

(b), in line 4, leave out from "or" to "rate" and insert "(b) he is entitled to the highest"—[Mr. Scott.]

Lords amendment No. 4, as amended, agreed to.

Subsequent Lords amendments agreed to.