HC Deb 21 June 1996 vol 279 cc1179-86

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brandreth]

2.30 pm
Mr. Michael Clapham (Barnsley, West and Penistone)

I am grateful for the opportunity provided by this debate on the changes to reduced earnings allowance, because many of my constituents, and people across the country, have been affected greatly by this monstrous cut in benefit. The cut was introduced without any consultation and certainly without a debate in this Chamber.

I will give the background to reduced earnings allowance so that we can put the debate in context. As the Minister knows, reduced earnings allowance was introduced in October 1986. It replaced the special hardship allowance, which was similar, but, in terms of nomenclature, the name "reduced earnings allowance" better fitted it.

The allowance is an award that is made to claimants who have a loss of faculty as a result of an industrial injury. Those claimants have been awarded a life disablement assessment for the disability resulting from the loss of faculty if that loss of faculty prevents them from being able to carry out their regular occupation or an occupation of equal standing. It is, therefore, really an extension of disablement pension which helps to make up lost earnings. The maximum payment under the current benefit rates is £39.60. I point out to the Minister that, for 90 per cent. of the recipients, the benefit does not cover their lost wages.

In September 1990, the Government saw fit to withdraw the benefit altogether, despite a report from their own advisers, the Industrial Injuries Advisory Council, saying that the benefit should be retained. IIAC put the argument to the Government that the benefit enabled employees who were in the early days of a crippling disease to take lighter work in a better environment and so, in some degree, to prevent the effects of that disease.

An example would be coal face workers who were diagnosed as suffering from pneumoconiosis who could afford to leave the coal face and to come into a dust-free atmosphere where their health would be helped and where their loss of earnings would be to some degree cushioned by the benefit. That benefit is no longer available and coal face workers will not be able to take other work, because there is no incentive. Men who are diagnosed as suffering from pneumoconiosis will now continue to work at the coal face.

The Government estimated that the withdrawal of reduced earnings allowance would save £140 million by 2001. At the time, the Government said that that money would be used for a new package of benefits, but I have seen no evidence of a new package of benefits and certainly no benefit of the same type as the reduced earnings allowance. Perhaps the Minister will comment on that.

The real focus of the debate is the Social Security (Industrial Injuries and Diseases) (Miscellaneous Amendments) Regulations 1996, which were discussed by the Fourth Standing Committee on Delegated Legislation on 8 May 1996. The provisions of the regulations were implemented on 24 March 1996. Under the regulations, men and women who reach retirement age lose their reduced earnings allowance and transfer to the retirement allowance, but the retirement allowance is paid at only 25 per cent. of the rate of the reduced earnings allowance.

The average loss of earnings is about £30 a week and the impact on couples living on state pensions has been dramatic. I see people regularly at my surgeries who bitterly complain that, as a result of the transfer to retirement allowance, they find it difficult to make ends meet. Men and women have the same problem, because women who used to work in factories were disabled through tenosynovitis. They were on reduced earnings allowance, but have been changed over to retirement allowance and they find it enormously difficult to adjust. I calculate that the reduction is equivalent to a reduction of about £9,000 in the salary of a Member of Parliament. Imagine the outcry if Members of Parliament suddenly found that their earnings had been reduced by £9,000.

The reduction in reduced earnings allowance and its application raises four important questions. The first is the impact on the individual, the group and the community. I am sure that the Minister would accept that the reduction affects some communities more than others. According to the latest Butterworth law text, in 1992, prescribed diseases accounted for only 19 per cent. of the 204,000 pensions paid. That 19 per cent., or about 38,000, comprised 15,000 pneumoconiosis pensions, 14,000 industrial deafness pensions and 9,000 others. Those figures clearly show that mining communities will contain the largest proportion of the 18,000 claimants—the Minister gave the figure in a written answer on 18 June 1996—who have had their benefit reduced to the retirement allowance. The bulk of the claims will come from mining communities.

Secondly, there is no transitional relief. The benefit cut has been introduced without any tapering. Many claimants have reduced pension rights because, after they suffered their injury or disease, they could not work or went on to light work. As a result, their contributions to any occupational pension scheme are much less than they would otherwise have been. It has to be understood that the majority of claimants would not have pursued a common law damages claim. The issue of pension rights has not been addressed. I contend that the reduced earnings allowance helped, in some way, to make up for reduced pension rights.

Thirdly, I refer to discrimination. For women, the cut-off point is 60 years of age; for men, it is 65. The Minister will be aware of several European Court cases that directly challenge this. As was pointed out by my hon. Friend the Member for Manchester, Withington (Mr. Bradley) when the regulations were discussed, one of the cases dealt with severe disablement allowance, which now ends at 65 for men and women. I accept that the Minister did not have a lot of time when he replied to that debate, but he did not address that issue. When he comes to the Dispatch Box today, will he tell us whether he intends to equalise the benefit cut-off at 65 for men and women? If that is not his intention, will he tell us why?

Fourthly, the regulation introduces a pernicious 12-months rule on retrospection, for which I believe there is no rationale. When I asked the Minister about this, he said that one does not backdate until the earnings capacity has been affected. We all accept that, but is the Minister aware of the way in which the good causes rule works? I shall refer to that rule in a moment in relation to a case and show how it is used to scrutinise cases and how it can prevent reduced earnings allowance from being paid. There was already a restriction, and there is no need for the 12-months rule. In a written question, I asked the Minister about the thinking behind the rule, and he replied: reduced earnings allowance is designed to bring the allowance into line with other, non-industrial injuries, earnings replacement benefits… It is not justifiable to continue backdating payments in such claims indefinitely."—[Official Report, 6 June 1996; Vol. 278, c. 529.] The Minister's response shows a lack of understanding of the matter. Some injuries have a long latency time, and diseases are the result of a development, not an event. I refer to diseases such as pneumoconiosis and asbestosis, which take years to develop. During that period, which can be as long as 20 or 30 years—in fact, I will refer to a case where it took 40 years—a man or a woman can have a reduced earnings capacity. For example, people may have to take a job paying a lower wage than they would have taken if the disease had not developed.

There is no logic in not allowing the claims to be backdated to the date of development. When tribunals decide whether there is to be backdating in industrial disease or injury cases, they always backdate to the date of development. In so far as we are talking about cases before 1990, the reduced earnings allowance should not be restricted by the 12-months rule.

I shall cite two examples from my constituency. First, I refer to Mr. Morris, who was a deputy at the time his injury occurred in 1985. He was struck by a rock that fell from the roof in a colliery and he was hospitalised for two weeks following the accident. He noticed the onset of a tremble, which was later diagnosed as Parkinson's disease. His common law claim was settled for £750. The chap never worked again, yet it took until 1994 for a new diagnosis to be made which persuaded the medical authorities that his condition related to his previous accident. In 1994, he was awarded a 70 per cent. disablement assessment backdated to the date of the accident.

Mr. Morris claimed backdated reduced earnings allowance, but unfortunately he was refused under the good causes rule. His wife was dealing with his affairs because the tremble had become so bad that he could no longer write. The form that she completed immediately after the accident, when my constituent had a closed final assessment, had an attachment advising her that she could apply for reduced earnings allowance. She did not fill in that form at the time. The wording of the form—as it was in 1985—was most ambiguous. As Mrs. Morris did not complete the form, the tribunal judged that she had not held good cause. We appealed to the commissioner, who upheld the tribunal's early decision.

That case is an example of the good causes rule scrutinising the backdating. As that applies in all such cases, there is no need for the 12-months restriction, nor can it be justified.

My second example relates to a constituent who suffers from an industrial disease—Ted Dudley, who operated a slusher machine during the 1950s and 1960s. You will know the purpose of those machines, Mr. Deputy Speaker; at the time, they had asbestos brake linings. Gradually, he developed a chest condition which worsened over the years. Towards the end of last year, it was established that he had a disease caused by a combination of particles of asbestos in his lungs and coal dust. The tribunal awarded him a 60 per cent. disablement assessment backdated.

In Mr. Dudley's case, there is no claim for reduced earnings allowance, as, when he changed to lighter work, the Coal Board maintained his wages at the rate they would have been had he continued working at the coal face. That is one example of a good employer. However, many employers would not be so understanding in their treatment of employees. In that case, it took 40 years for my constituent's disease to be diagnosed as relating to his employment. That illustrates the need for the ability to backdate the reduced earnings allowance. Although my constituent did not have reduced earnings, he could well have done.

Those two recent cases—there are many thousands more—show that the effects of an injury or a disease can be latent for many years. In my first example, the effects of an injury were latent for nine years. In the second, the effects of an industrial disease were latent for 40 years. The Minister knows that there is no rationale for the 12-months rule. I am asking him to come clean today and tell us whether there is justification for it. If, as I believe, there is not, is he prepared to reinstate the position to what it was before the regulations came into effect—to remove the 12-months restriction and allow the scrutiny to be made by the application of the good causes rule?

It seems to me that the savings made in relation to the suffering caused are very tiny. In a written answer to my hon. Friend the Member for Neath (Mr. Hain), which appears at column 420 of the Official Report of 18 June 1996, the Minister said that just £25 million would be saved in the first year, 1996–97. That represents 0.03 per cent.—or three hundredths—of his Department's total expenditure. That amount would decline naturally in any case, as the recipients are elderly. However, that factor was not taken into consideration. Immense and needless suffering has been caused which I believe cannot be justified.

2.49 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Roger Evans)

I congratulate the hon. Member for Barnsley, West and Penistone (Mr. Clapham) on obtaining this Adjournment debate and continuing the discussion about this important issue which he and I have had in different parts of the House. I agree with his first point: the subject affects particular individuals and communities more than others. It is obviously a matter of particular concern to the hon. Gentleman's constituents.

I am conscious of the fact that I have many questions to answer and only 10 minutes in which to do so. I shall try to deal with all the points that the hon. Gentleman raised. His second point related to transitional relief. I shall develop that argument in a moment when I explore what has happened in that area—who gets retirement allowance and who gets reduced earnings allowance. The issue is not whether there should be a change from one allowance to another, but what should cause and trigger that change. The previous rules were arbitrary and unfair and I shall explain why we do not believe that transitional relief is appropriate in those circumstances—although I understand why those who had the good fortune to receive reduced earnings allowance in circumstances that are not defensible as a matter of rational policy are distressed to find that it has come to an end.

The hon. Gentleman raised a third specific question of discrimination in European law and the ages of 60 and 65. Under the European directive, we are allowed to have unequal pension ages for women and men—although the Government have acknowledged for some time that the inequality must be remedied. We believe that we are legally entitled to apply it in the present context.

The hon. Gentleman also developed a fourth powerful argument, to which I listened carefully. It seems to me that he argues not that the backdating should take place from the date of the development of the condition, but that it should be backdated to the onset of the reduction in earning capacity. I recognise the force of that argument, and the hon. Gentleman has a lesser task in persuading me of its value. I can appreciate why he puts it that way, and I shall examine the two constituency cases that he mentioned to see whether they can cast any more light on the issue. I have not yet had a chance to examine them.

The general principle is: if the condition has deteriorated to the extent that it has manifested itself to the sufferer, one would expect that to have happened at the time when or before the lack of earning capacity began to have an effect. The reduced earnings allowance is designed to compensate people for the loss of earning capacity. If that is not correct or if it is argued that it is not appropriate according to the facts, I shall be happy to look into the matter. Generally, 12 months is the normal period for backdating income-related benefits and that is why we are attracted to it in this context.

Those are the four specific points that the hon. Gentleman mentioned. He began by calling this a monstrous and an unannounced cut. I understand that it may well seem like that to those who previously enjoyed the benefit, which has now ceased. However, if we examine the history of the matter, we see a rather different picture. There were vigorous debates in Parliament in 1988 about the fundamental issue of policy. Parliament resolved the issue, at the Government's instigation, to the effect that when people suffered loss of earning capacity, they received reduced earnings allowance, and when people retired, they received retirement allowance at a lesser rate in line with the fact that their pensions would be less as they had been less able to contribute to such a scheme as a result of their incapacity. That is why there are two rates. The real issue is not the way in which the scheme operates generally, but what is the trigger and the appropriate point at which one moves from receiving reduced earnings allowance to retirement allowance. That is where the difficulty arises.

In 1988, the matter was relatively simple. If after pension age people continued to earn, they were caught by the pensioners' earnings rule, which was abolished in 1989. In other words, if people continued to make serious earnings after age 65, they were likely not to draw their old-age pension, because the rules stopped them, but they were entitled to continue to draw reduced earnings allowance, because they were still in work, suffering a reduction in earning capacity. That is why the benefit continued to be paid.

Accordingly, in the 1988 legislation, the trigger for passage from one benefit to the other was the drawing of the old-age pension. That was logical at the time. The difficulty arose the following year, when we abolished the pensioners' earnings rule. The difficulty, which became embodied in the 1989 legislation, was what the new test should be. Whether the full implications of the test on which the parliamentary draftsmen settled and which Parliament adopted were understood is another matter, but when the courts examined it, in effect the 1989 legislation said, "You move from one to the other when you have reached pensionable age and you give up regular employment."

The difficulty is that that envisages a two-stage process: first, someone reaches pensionable age; and, secondly, they give up regular employment. What happened—this is a classic point of law—is that people realised that if they gave up regular employment before they reached pensionable age, even by a day, the trigger could never take place. Some people managed, therefore, to pass from one benefit at a higher rate to a lower benefit simply because they retired on the first day of the month and gave up regular employment on the second, but the wily person—or the person who, for perfectly good reasons, gave up regular employment shortly before—could never lose the higher rate of benefit. That cannot be fair and it cannot be right.

The 1990 regulations gave the Secretary of State powers to make a ruling on what was considered to be regular employment. That rule remains in place. It is 10 hours a week averaged over five weeks. Before the changes, the intention was, and remains, that if someone over pensionable age is in regular employment and continues to earn, they can continue to draw reduced earnings allowance. If they give up regular employment under the new test, they will fall back on retirement allowance.

There were further difficulties with the way in which the parliamentary draftsmen had worded the legislation. A person had to attain retirement age and give up employment. The concept of giving up employment suggested that someone was doing so out of their own volition and choice. What happened when someone was made redundant? It appeared that they did not give up employment but were made redundant, so they remained on the higher rate of benefit and did not pass to the lesser rate of retirement allowance. To make matters even more horrific, as the case law developed, one can imagine the problems on the voluntary leaving of employment rule: "Were you sacked? Were you pushed? Who is to blame? You may or may not get benefit, depending on whether you are culpable." Comparable problems arose.

The result of all that was not just unfairness and a very arbitrary state of affairs, but a difficult position for the Benefits Agency. We decided that that state of affairs was wholly unsatisfactory, both as a matter of policy and as a matter of administration, so we laid the instrument that changed the rules from 24 March this year and left the position as it was always intended to be since 1988 as a matter of practice: if someone over pension age gives up regular employment, they get retirement allowance. If they continue in regular employment, they get reduced earnings allowance.

Because the intentional test of giving up employment had clearly been unsatisfactory, we decided that the only way to see whether it had been applied properly was to carry out a special exercise to identify all reduced earnings allowance recipients over pension age, and all retirement allowance recipients. They had to be identified through a case-by-case examination of the whole industrial injuries caseload, including closed files, totalling some 4 million. That exercise could not begin until we had sorted out the new regulations. Once the new regulations were in place, all the old cases found were revised by independent adjudicating officers, first to review the on-going entitlement to reduced earnings allowance after 14 March, in accordance with the new provision, and secondly to review whether the original decision to transfer those already on retirement allowance was correct.

The Benefits Agency identified 20,000 over pension age reduced earnings allowance cases and 12,000 retirement allowance cases—

The motion having been made at half-past Two o'clock, and the debate having continued for half an hour,MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Three o'clock.