Incapacity Benefit (Hansard, 26 May 1999)

HL Deb 26 May 1999 vol 601 cc921-5 921

§ 2.58 p.m.

§ Lord Morris of Manchester asked Her Majesty's Government:

§ What recent representations they have had about their proposal to change the rules of entitlement to incapacity benefit, and what action they are taking.

§ The Parliamentary Under-Secretary of State, Department of Social Security (Baroness Hollis of Heigham)
My Lords, the Government received a number of representations about the proposals to restore incapacity benefit to its proper role as a benefit for people who have had to cease work because of illness or disability and to extend it to those severely disabled young people who have never been able to work. We responded positively to a number of points made to us and will continue to listen to representations.

§ Lord Morris of Manchester
My Lords, my noble friend is aware that my interest in this benefit derives from much involvement in creating it. Did not the Benefit Integrity Project, now abandoned after finding not one case of proven fraud, explode the myth that disabled people are benefit cheats as a crude and cruel insult? Is not the truth that £5 billion to £6 billion goes unclaimed in disability living allowance alone? When will improving the take-up of disability benefits be prioritised? And are Ministers publicising the Government Actuary's highly expert advice to them that, due to relatively low benefits here: future costs of social security in the UK look much more manageable than in other European countries"? 922 Would it not be wise now to think more deeply, to distinguish between reform and retreat, and to do so in consultation, not conflict, with disabled people?

§ Baroness Hollis of Heigham
My Lords, I entirely agree with most of what my noble friend said. Like others in your Lordships' House, he has a very long experience of disability issues. Indeed, he has devoted his life to disability issues. He was obviously responsible for the major stepping stone of the Chronically Sick and Disabled Persons Act 1970. My noble friend is absolutely right to say that what BIP showed was, as we have always said, that disabled people do not seek to cheat the system. Although a handful of people were referred for prosecution, no established cases of fraud have been determined.
BIP showed that there was something like a 15 per cent level of error—for the most part overpayment—because people became better, which is good. Alas, sometimes they became worse, and their benefit did not always adjust to reflect what was happening to them. So it is right and proper to check entitlement. But, as my noble friend said, we also have the problem that within DLA and attendance allowance something like 50 per cent of those who are entitled to the benefit are not claiming. We are certainly working with the disability organisations, as my noble friend suggests, to seek to ensure that those who are entitled to the benefit do claim it.

§ Lord Astor of Hever
My Lords, is it not the case that, under the Welfare Reform and Pensions Bill, those with incomes of over £10,000 per annum will lose their incapacity benefit, while the Tax Credits Bill will make payments to those with incomes of over £25,000 per annum with no means test? Is that not absurdly inconsistent?

§ Baroness Hollis of Heigham
My Lords, I am not sure that I would agree with the noble Lord's description of either of those Bills. First, in terms of the proposals for incapacity benefit, if, for example, an individual was on long-term incapacity benefit and had dependent children and, therefore, a dependent partner, that person would have to have an income of nearly £16,000 a year through an occupational pension before losing any entitlement to the benefit.
Secondly, as regards the comparison with DPTC and the noble Lord's suggestion that someone would not lose money until he was earning £25,000 a year with no means test, I should point out that DPTC has a double test. I refer to the disabled persons' tax credit which will be replacing the disability working allowance from October. It has a double test, both of disability and of low income. Therefore, there is indeed a means test. It is an income-related benefit and only where there are children and the disabled person is claiming a children's tax credit for them, together with child care allowance, will it take people up into the kind of figures mentioned by the noble Lord. We believe that these changes are right and proper. We believe that the changes in the working families' tax credit are right and proper. 923 They do what disabled people ask us to do; namely, to encourage and help them to return to work. I am sure that that is what your Lordships would wish.

§ Lord Ashley of Stoke
My Lords, is my noble friend the Minister aware that my postbag and my many contacts with disabled people clearly indicate to me that there is alarm, anger and fear about the Government's proposals on incapacity benefits? I have with me today 21 letters which came in just one post this morning. Every single one of them indicates passionate opposition to the Government's proposals. Will Ministers accept that it is totally unacceptable to break a moral contract between the Government and people who have paid their national insurance contributions in good faith? Is it not also unacceptable to begin to means test disabled people who have incomes as low as £5,000 a year?
Does my noble friend agree that what is happening is as follows? This Government are a generous government, but they are being widely perceived as a mean government because of these two proposals. Surely the only way to stop this nonsense is for the Government to withdraw them and begin again.

§ Baroness Hollis of Heigham
My Lords, my noble friend referred to "alarm, anger and fear". I should point out to him that, as he knows—and, indeed, as noble Lords know—these proposals will not affect any existing claimants. Any existing holders of these benefits will be unaffected by the proposals.
My noble friend also referred to a moral contract. Yes, that is right. However, incapacity benefit is presently designed to be an earnings replacement for someone who becomes disabled in work. It was meant to replace the wages. However, over the past 20 years, it has become an unemployment benefit for many people. In fact, four in 10 of those who receive IB have been previously unemployed. Alternatively, it has become a pension top-up for those taking early retirement. We are saying that the contributory contract—the moral contract—to which my noble friend referred is the contract which establishes the entitlement to benefit, based on recent work. That is what our Bill will do.

Lord Campbell of Croy
My Lords, while reform is necessary, would not the way forward for this benefit be an efficient and effective change or adjustment to the gateway, rather than means testing being introduced in this case? Did the Government listen carefully to those disability organisations which recently felt obliged to resign from the Government's advisory group; or did they listen to the former Minister for welfare reform, Mr. Frank Field?

§ Baroness Hollis of Heigham
My Lords, we certainly listened to the Disability Benefits Forum. I was the Minister who was responsible at the time for establishing it. We found its advice, views and information to be invaluable, and continue to do so. Although the forum has wound up, and was due to do so at any rate during the month of May, we are continuing the working parties with the forum. We value that expertise.
924 The noble Lord also asked why we are not concentrating on gateways rather than income. We are looking at gateways. That is why we shall also propose in the Bill a personal capacity test to ensure that disabled people who wish to return to work are helped to do so by the adviser. The noble Lord is absolutely right to suggest that we do that, and we shall be doing so as a way of helping disabled people back to work.
However, there is a point about incomes. Disability benefits were introduced immediately after the Second World War. They were then revised in 1971 by way of the invalidity benefit and ultimately replaced by incapacity benefit. When they were introduced very few people had occupational pensions. Those benefits were going to people who were injured or who became disabled at work. Now something like 80 per cent of men and 70 per cent of women have occupational pensions. Our proposals will not affect four people in five who will become eligible for an incapacity benefit on financial grounds. But, of that one-fifth, half have occupational pensions which take them into the top 40 per cent of the earnings hand. Therefore, is it reasonable that one should be paying quite high pensions to people who already have high pensions, while other disability needs are not being met?

§ Lord Addington
My Lords, does the Minister agree that the arguments and the discussions that we are having today point to the fact that people feel that, at the very least, we are moving away from an entitlement derived from an insurance-based system towards a means-tested system? Further, does the Minister agree that that means that the Government have failed to communicate, if that is not indeed their intention?

§ Baroness Hollis of Heigham
My Lords, I take any criticism about communication; indeed, that may well be right. However, let us take, for example, the case of someone in their early 20s who works for six months only and then is unemployed for 20 years. He develops stress and seeks incapacity benefit on the grounds of a moral contract. Is that reasonable? I think not.

§ Baroness Thornton
My Lords, as my noble friend the Minister mentioned them once or twice in her remarks, can she tell us what the implications of the Government's reform will be for disabled children?

§ Baroness Hollis of Heigham
My Lords, one of the groups of people for which the Government are most anxious to strengthen support is indeed that comprising disabled children. As noble Lords may well know, we are not only improving disability living allowance and bringing it down for younger children; we are not only ensuring that young people who have never had the opportunity to work get higher rates of benefit—indeed, in future, they will now receive another £30 a week—but, also, as of about a month ago, I am delighted to report that my honourable friend the Paymaster General announced that disabled children in low-earning families, which presently receive a tax credit of £15 a week or £20 a week, will receive double that premium in future if they are disabled. So another £25 million 925 will go to disabled children from low-earning families. We think it is right to support children, particularly children from poor and vulnerable families. We are delighted to do that.