HL Deb 23 March 1999 vol 598 cc1276-9

11.35 p.m.

Baroness Hollis of Heigham rose to move, That the draft regulations laid before the House on 22nd February be approved [11th Report from the Joint Committee].

The noble Baroness said: My Lords, these regulations support the New Deal pilot schemes introduced at the end of November to help people aged over 25, who have been unemployed for at least 12 or 18 months, back into work. Building on the New Deal for people aged 25 and over, introduced in June, the purpose of the pilots is to find new and effective ways of helping unemployed people in this age group back into work. The regulations we are debating today enable the pilot providers to try out additional ways of encouraging and supporting people in moving back into work.

We propose that in 10 pilots, those unemployed for 12 months or more are included. In the other 18 pilots, those unemployed 18 months or more are being targeted. We wish to look at this to see what is the most effective point of intervention.

Such pilots will include a gateway period of up to 13 weeks, and exceptionally up to 17 weeks, to offer extra intensive help to assist people in their job search, based on the lessons learnt from the 18 to 24 New Deal. A period of intensive activity, which will usually last 13 weeks, will tackle barriers to work and help job-related training or assistance into self-employment.

In consulting widely on the content of the pilot schemes, partnership and private sector providers expressed a desire for additional flexibilities. That is why we seek to build on the regulations we made last November.

Two consistent requests which emerged from those working with "New Deal people" and which have emerged in consultation were the facility to help people who wish to start their own businesses and wider scope to use top-up payments to assist participants into work. The proposed regulations will enable us to respond positively to both such requests. Perhaps I may briefly skim through what is a limited number of regulations. Regulation 1 sets out the coming into force date of the amendment regulations and their duration. Regulation 2(3) to (5) introduces further disregards in the treatment of income and capital to allow top-up payments funded from sources other than those by ES, such as the European Social Fund, to be ignored in the calculation of JSA. Such new disregards will allow partnerships, who wish to extend the period of intensive activity for some people, to continue to pay top-up grants beyond 13 weeks.

Regulation 2(4) contains a technical amendment to the New Deal Pilot Regulations 1998 which corrects a minor drafting error. This amendment will ensure that payments made to participants by the Employment Service in respect of childcare costs are disregarded as intended.

Regulation 2(6), which is substantive, extends the rules for self-employment that already exist in the New Deal for young people, to participants—that is, the over 25s—in these pilots. Where agreed by the participant and the New Deal adviser, the participant will be able to trade as a self-employed person. However, as that person will remain on JSA, special arrangements will apply.

Perhaps I may describe them briefly. The gross receipts and expenses relating to their business will be handled through a special account which will be administered by the New Deal provider. This capital may be held separately from the special account if it comprises additional grants from organisations such as the Prince's Trust.

This "test trading" may continue for a period of up to six months or until participants have accrued £2, 000 in their special account after the payment of expenses. The agreements made with the pilot providers will ensure that the proceeds of special accounts—the trading funds—will be payable immediately to people who leave JSA or IS to go into work. If people remain on JSA or IS, the proceeds of the account will be payable 13 weeks after they cease test trading (or immediately if they leave JSA or IS before the end of the 13-week period). If people move off JSA and claim an in-work benefit, the funds in the special account will be treated as capital. These measures are designed to provide people with an extra incentive to leave JSA and go into work.

The focus is firmly on moving people from welfare into work. We need this framework and we are giving those concerned that £2, 000 limit which we think mimics realistic self-employment conditions.

Participants will be supported throughout the test trading period by a New Deal adviser. As the enterprise develops, the adviser will be on hand to discuss the viability of the business and, where the business is showing signs of success, to discuss the point at which it is sensible for the participant to leave benefit, possibly before the expiry of the normal JSA period. If, after 26 weeks, a participant has still not achieved a £2, 000 profit the participant will need to discuss with the adviser his or her future chances of success. The limit also ensures that people do not build up large profits while receiving benefits designed for those unable to sustain themselves from employment. That is why we have provided the £2, 000 limit. We want the New Deal to offer the maximum choice possible to people. The self-employment route, which these regulations introduce, adds to this choice.

In asking for briefing, I found a number of heart-warming examples of the success of self-employment for 18 to 24 year-olds. Some people had set up, for example, a removals business or a double-glazing repairs business. That immediate self-employment would not have been open to them in terms of employment capacity. We are seeking to expand the same opportunities for those over 25 for whom this would be even more appropriate, given that they are already more likely to have appropriate skills under their belts, but who, because of what happened to a previous employer, may not now have the opportunity of traditional, employed work. For many, we think that this will be a more promising route than working for an employer. With the introduction of the regulations, people will be able to try out self-employment with the safety net of continuing with JSA.

I hope that your Lordships' House will welcome these regulations which amend, and give added flexibility to, the regulations laid before the House last November. They will offer those 25 and over the same opportunities. We do not expect it to help many— perhaps 5 per cent.; we do not know—but we think that the notion of a trading account and the ability to receive advice from a New Deal adviser, together with the ability to remain on benefit while undertaking this, will produce not only an appropriate safety net, but also an appropriate springboard. I commend the regulations to the House. I beg to move.

Moved, That the draft regulations laid before the House on 22nd February be approved [11th Report from the Joint Committee]. —(Baroness Hollis of Heigham.)

Lord Higgins

My Lords, as was the case with the previous regulations, I found the note prepared for the Joint Committee extremely helpful. As a result, I have very few points to make. I am grateful to the Minister for responding earlier to my points about those documents. I was slightly surprised that they did not appear to be in the Printed Paper Office, as I would have expected.

This is an optimistic and ambitious project, involving stimulating people to set up their own business, which is clearly a much more risky operation than simply finding a job. I understand why the Minister said that it may not affect many people. If I may express a personal view, the idea of test trading has something to commend it. However, what, roughly, does the Minister expect the cost to be per job, given that the risks involved are considerable? If the Minister does not have that figure, perhaps she can tell me the likely total expenditure on the operation.

Lord Addington

My Lords, I too have few points to make on these regulations. One concerns the incapacity pilot regulations. We welcome the recognition that there is an intermediate state between people who are totally incapable of working and those who are able to work. We thank the Government for that.

However, we feel that the IS limit on earnings which allows earnings without loss of benefit is far too low. The limit has not been updated since 1988; if it had been, it would be nearly £28. I hope that the Minister will bear that in mind for the future.

The Government said that they are determined to help people avoid the poverty trap. However, it would appear that the person who earns £15 while on incapacity benefit keeps it; but if that person earns £16 a week, they keep none of it. Surely that is an error in the nature of the regulations. I hope the Minister will be able to assist with an explanation.

Baroness Hollis of Heigham

My Lords, again I shall do my best to reply to the points raised. First, we are talking about the New Deal pilots for those over 25, not the IB regulations. Perhaps I have misunderstood the point of the noble Lord, Lord Addington.

Lord Addington

My Lords, I shall make a small admission. I am speaking on behalf of my noble friend Lord Russell. I may well have got that point wrong, and if so I shall withdraw it.

Baroness Hollis of Heigham

My Lords, it is an easy mistake to make at this time of the night when there are so many regulations. But the noble Lord's points were pertinent to the set of regulations rather than to specific ones.

The noble Lord, Lord Higgins, made the point—as we all accept—that self-employment is risky. As I say, some of the examples coming from young people—one became a tree surgeon—are very impressive. But my statistics indicate that 2 per cent, of the young people on the New Deal have gone into self-employment. I was asked what we might expect to see in similar circumstances. It may be double that, given the extra human capital of skills that older people, by definition, would employ. But the noble Lord is right; it is the niche market. However, for those for whom it is appropriate, it can be extremely rewarding.

We therefore do not have workings as costs per job as different people will be working for different periods. They will come off benefit earlier. Some will springboard off benefit for ever by going into work; others will come back in. We have allocated £129 million on die New Deal pilots for those over 25, but we will only be able to work out effective cost for a person in employment, without them going back on to benefit, when the scheme is well under way.

I believe those were the points raised. Again, if I have missed any, I shall write to noble Lords. I commend the regulations to the House.