HL Deb 02 February 2005 vol 669 cc231-47

3 p.m.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Work and Pensions. The Statement is as follows:

"With permission, I should like to make a Statement on the Government's Five Year Strategy, Opportunity and security throughout life. Since 1997, the Government have begun to transform the welfare state from a passive one-size-fits-all system to an active service that tailors help to the individual, enabling people to acquire the skills and confidence to move from welfare to work.

"When the party opposite was in power, boom and bust twice led to unemployment reaching 3 million and the numbers on incapacity benefit trebling to 2.6 million. By 1997, one in five families had no one in work and one in three children were growing up in poverty.

"There are now more people in jobs than ever before. Unemployment is at its lowest for 30 years, with long-term youth unemployment 90 per cent lower than in 1997. With almost three-quarters of the working age population in work, our employment rate is the highest of any of the G8 countries.

"By supporting people in work and providing financial security for those who cannot work, we have lifted 2.1 million children and 1.8 million pensioners out of absolute poverty since 1997. But we can and will go further.

"Today's strategy sets our course for the next five years. It is a difficult course that will take us beyond concern for the unemployed to help those even further away from the labour market, who have more complex and substantial barriers to overcome. Its goal is genuine inclusion—stamping out the discrimination and disadvantage that prevent people fulfilling their true potential.

"The backdrop to this strategy is a healthier society where people are living longer. Two years from now, the number of people over state pension age will overtake the number of children. In just over 30 years, the proportion of the population aged 65 and over will increase by 50 per cent while the number of pensioners aged 80 and over will double.

"If we are to meet the challenges of our ageing society, we cannot afford to squander the skills and contributions of those who can and want to work but remain outside the labour market.

"This strategy establishes a long-term aspiration of moving towards an employment rate equivalent to 80 per cent of the working-age population. This could involve supporting as many as I million people on incapacity benefit into work, as well as an extra 300,000 lone parents. We also envisage 1 million more older workers in the labour force, including many who will choose to work beyond the traditional retirement age.

"As I have mentioned—and it bears repeating—between 1979 and 1997 the numbers on incapacity benefit trebled. Had this trend continued, there would now be 4 million on incapacity benefit instead of 2.7 million. New claims are down by almost one-third since 1997 and we have even seen the first small fall in the total numbers.

"People who claim incapacity benefit have too often been told that they should not expect to work again. Yet we know that perhaps a million people claiming IB say that they would like to work if they were given sufficient help and support. Nine out of 10 people coming on to IB expect to get back to work quickly.

"And there is growing medical evidence that for many conditions like back pain and depression, working is much healthier than being inactive. So failing to help those on incapacity benefit is not only bad for the economy but also bad for incapacity benefit recipients themselves.

"We already know that active intervention works. We have invested in Jobcentre Plus and the New Deal to give people employment support, regardless of what benefit they happen to be on. The Government's Pathways to Work pilots build on this platform and have achieved startling success, with six times as many people getting back-to-work help and twice as many people recorded as entering jobs compared with the rest of the country.

"One of the reasons that Pathways to Work is succeeding is that it focuses on what people can rather than on what they cannot do. And while involvement is mandatory only for new claimants, more than 10 per cent of those taking part are existing claimants who asked if they could participate.

"As my right honourable friend the Chancellor announced in his Pre-Budget Report, the Pathways pilots will soon be extended to cover one-third of the country. Alongside the extension of Pathways, today's strategy sets out the wider changes that are needed. Employers, health professionals and government must all work together more effectively to get people into work and help them to stay there.

"Employers must create healthier workplaces and play a bigger role in the rehabilitation of their employees. The Health and Safety Executive will trial and develop "Workplace Health Direct", which will provide support for occupational health in small and medium-sized firms. GPs and other health professionals must reinforce the message that work is a route back to health.

"Against the background of this wider change, and when we have the extra support of Pathways in place, we will implement a radically reformed incapacity benefit so that, like Pathways, it focuses on what people can do rather than on what they cannot. The main purpose of IB is to support those who, through no fault of their own, are restricted in their ability to work because of a health condition, disability or injury.

"This financial security will always be essential. Society has a responsibility to provide financial support to people who are denied the opportunity to work because of health problems, and to do so for as long as necessary. That is why our reforms are not about cutting or time-limiting benefit.

"But the current IB system is anomalous. Incapacity benefit classifies those receiving it as incapable of working, even before they have had a formal medical examination. And when they have had the examination—the personal capability assessment (PCA)—those who are entitled get no assessment of their likely future ability to return to work. In other words, it makes no distinction between whether the individual is suffering from terminal cancer or back pain.

"What is more, there are few incentives in the system to encourage those with more manageable conditions to consider their potential for work. Indeed, the benefit increases with time, creating an incentive to stay on it for longer.

"Our Five Year Strategy sets out a better model for new claimants of the benefit. It represents the biggest change in benefit for sick and disabled people since Beveridge. Our reforms will offer more support and help than is currently available for those with the most severe health problems and impairments, while ensuring that there are clear rewards for moving into work and that the financial risks of trying out a job are minimised.

"In the future, there will be an initial holding benefit—at jobseeker's allowance rate—payable until the personal capability assessment is completed, which should be within 12 weeks. This assessment would become the gateway to the new benefits, accompanied by an employment and support assessment which provides a fuller evaluation of potential future work capacity.

"This personal capability assessment would lead to one of two allowances. The majority would receive a rehabilitation support allowance, which would require claimants to engage in work-focused interviews in return for which they would receive a conditional extra payment. At the interview, claimants will agree an action plan, and fulfilment of this plan would lead to a further conditional payment. Recipients who co-operated fully would get more than the current long-term rate, but any who completely declined to engage would receive only the holding benefit minimum.

"Those with the most severe health conditions or disabilities would receive a disability and sickness allowance. Far from cutting benefits, these recipients would get more money because they are at most risk of persistent poverty. But we are not writing anyone off, so their engagement in some work-focused interviews would be encouraged, in line with the Pathways to Work programme.

"So our message is clear: a basic benefit below which no one should fall; a speedy medical assessment linked with an employment and support assessment; increased financial security for the most chronically sick; more money than now for those who take up the extra help on offer; and less money for those who decline to co-operate.

"As with Pathways, we will develop these reforms in partnership with our stakeholders, including those on the benefit itself. The reforms will need to be shaped on the basis of the evidence of what works, with piloting playing an important role. The timetable for implementation will depend on the continued lessons learnt from Pathways and on the available resources and the timing of any necessary legislation. But our goal is to have the main elements of the new system in place by 2008.

"These reforms are, of course, only part of the much wider programme at the heart of our strategy for opportunity and security throughout life. At every stage of life, our approach must continue to provide tailored help and support to offer real opportunity for those who can and want to work, while ensuring financial security for those who cannot.

"We will continue to support families and children to ensure that every child has the best start in life and that parents have more choice about how to balance work and family life. We will support parents in their parenting role by extending rights to paid maternity leave and enabling families to have access to affordable, flexible and high quality childcare. Already, our New Deal for Lone Parents has helped nearly 300,000 lone parents into work and has taken the lone parent employment rate over the 50 per cent Rubicon for the first time. In fact, today I can announce that we have hit a new lone parent employment rate of 55.8 per cent—nearly 56 per cent—a 10 per cent increase since 1997.

"Today's strategy sets out our intention to go further and pilot a Pathways to Work for lone parents: a more progressive model of active engagement and persuasion for all lone parents on benefit, based on clearer guarantees of advice and support. In line with our overall approach of rights and responsibilities, it will guarantee a clear financial gain from work, guarantee childcare support, and guarantee the ongoing help of trained professional advisers—all in return for a responsibility to engage more intensively with our employment advisers. And for those with children aged 11 or over, we will pilot automatic payment of an activity premium, on top of all existing benefits, conditional on taking up agreed activity to help lone parents move into work.

"Giving people the choice and opportunity to work for longer will also be crucial. This is not about raising the state pension age, but about helping people to work up to that age and offering better rewards for those who choose to work beyond it.

"Improved arrangements for state pension deferral will mean that a typical person who delays taking their state pension for five years could receive a lump sum payment of between £20,000 and £30,000, or an increase of 50 per cent to their weekly pension for the rest of their life. Working for longer, together with the increased confidence in saving that will result from the Pension Protection Fund and other measures, will play an important part in helping people to save to meet their retirement aspirations. But, guided by the work of the Pensions Commission, we will meet the long-term pensions challenges of our ageing society. We will set out the principles upon which we will base our pension reforms separately in the near future.

"In delivering this Five Year Strategy, my department will continue to modernise its service delivery, reducing overheads, streamlining processes and delivering a more efficient organisation. Over the next five years, this Government will build on their employment record to open opportunity for those beyond the traditional definition of unemployment and to move towards a ground-breaking aspiration of an 80 per cent employment rate. We will build on the lessons learnt from our successful Pathways to Work pilots to reform incapacity benefit and, with the support of employers and the medical profession, help and support IB recipients who want to work to do so.

"We will build on our progress in fighting discrimination, moving to a world where opportunity and security are not dependent on race, disability or ethnic background. We will build on our progress in tackling poverty, halving child poverty by 2010, continuing to lift pensioner income and helping another 300,000 lone parents into work.

"With this strategy, we will build for the future— a future with opportunity and security throughout life. I commend the Statement to the House".

My Lords, that concludes the Statement.

3.15 p.m.

Lord Higgins

My Lords, I thank the Minister for repeating the Statement made in another place. I congratulate her on her stamina in reading out such an extremely long document, loaded as it is with highly selective statistics. An important debate is to follow. so I shall try to be as brief as I can.

The Statement is grandiosely entitled, "The Department for Work and Pensions' Five Year Strategy", which seems to imply that it will be reasonably comprehensive. So one's initial reaction on reading the related document is, "Is that all?". There is nothing at all on many extremely important aspects of the department's work; for example, how it proposes to resolve the present chaos in the Child Support Agency. There is virtually nothing on pensions. There is certainly nothing on how the present crisis in pensions is to be resolved.

The Government appear to be hiding behind the Turner report and going into an election with a strategy of no content whatever, other than to say, "We must wait and see what Turner says". That will be little consolation to those who in recent years have seen final salary schemes decimated, massive increases in means-testing, and vast complexity in the benefit system so that many people do not understand it and do not apply for benefits. It is not even clear whether the Government's initial statement when they came into office—that their intention was to reverse the ratio of 40 per cent private provision and 60 per cent public provision—is still part of their policy.

The Statement does make a brief reference to pensions. It says: Improved arrangements for state pension deferral will mean that a typical person who delays taking their state pension for 5 years could receive a lump sum payment of between £20,000 and £30,000, or an increase of 50 per cent to their weekly pension for the rest of their life". It does not say whether that is to be means-tested. Perhaps the Minister will tell us whether it will be.

The Statement also refers to the Pension Protection Fund which we have recently debated in the House. However, it makes no reference at all to the financial assistance scheme, which is now universally regarded as likely to be a bitter disappointment to those whose pension schemes have collapsed because the Government's provision of money is so clearly inadequate.

The second reaction to the Statement is one of déjà vu. One has heard it all before. It is almost, word for word, the same as the Statement that the Government made soon after coming into office, in 1998. They now say: The current IB system is anomalous". What have the Government been doing about it over the past seven years? Well, they did something. The last reform focused on reducing the value of incapacity benefit to new claimants by means-testing. It was no doubt a surprise that they should have done so. Then, however, they modified it somewhat as a result of a vote in your Lordships' House.

What has happened? If one looks at the Statement, one finds that, if anything, the situation has got worse rather than better. The Secretary of State says that the number of people going on to incapacity benefit is down. Can the Minister confirm that the number of people leaving incapacity benefit is also down, and that the total number of people claiming benefits is now 140,000 higher than it was in 1997? Indeed, I understand that there are now 2.7 million people of working age on incapacity benefit of one kind or another. So can the Minister tell us—this is another question—whether it will apply only to new claimants and not to the 2.7 million people currently on benefit?

Is not the basic problem that those on incapacity benefit are deterred from finding work because they believe that, if they go to work but find they cannot cope, they will not be able to go back on incapacity benefit at the previous rate? Is that not a massive deterrent to reducing the number of people on incapacity benefit? Do these proposals do nothing to cure that particular point?

If the proposals do not apply to existing benefit recipients, and as the proposals apparently will not come fully into operation by 2008, when does the Minister expect the numbers to go down?

Many other questions could be asked on the Statement. We will, no doubt—I hope—have an opportunity to debate it in the future. However, I think that people are entitled to an answer to those specific questions. The Government should not be judged on welfare reform on the basis of today's Statement and the rather pathetic assertions made in it. They should be judged on their record. If that happens, then they will not remain in power.

3.22 p.m.

Lord Oakeshott of Seagrove Bay

My Lords, from these Benches we also thank the noble Baroness for repeating the Statement from another House. The Statement is meant to be about the five-year strategy of the DWP, which I have been able to read to some extent today. In a sense it is almost like the dog that barks—that is, talking about incapacity benefit—and the dog that did not bark— that is, talking about pensions, which noble Lords might think is a pretty important part of the five-year strategy of the DWP.

I propose to discuss both issues, dealing first with the incapacity benefits problem. Seven years ago Ministers were saying exactly the same things. It reminds me of Mrs Thatcher after she had been in power for about this length of time. She seemed to stand up and say, "This is a problem; what is going to be done about it?" Again, she did not seem to accept responsibility for the fact that a Conservative Government—at that time, or a Labour Government now at this time—had been in power for, one might think, a reasonable period to be judged on results rather than on producing an elegant description of the problem.

On the specific proposals put forward today, let us focus on the facts. The real cost, allowing for inflation, of incapacity benefit was just under £9 billion when the Government came to power and it is £7 billion today. That is not to say that there are not areas that can be improved, but let us not get this issue out of perspective and say that it is a great problem leading to a crisis in the social security budget. My view, and that from these Benches, is that this is very largely a problem of regional inequalities.

If your Lordships look in detail at the numbers on IB, you will see that there is an enormous difference between the numbers in the effectively full or over-full capacity labour markets in the south-east, east Anglia and, indeed, the south-west, from the rest of the country, which you cannot possibly explain just by saying that there are perhaps more retired or early retired miners or shipworkers in Wales or the northeast. The fact remains that this is largely a market-related issue. If you have a strong labour market with plenty of jobs for people of all kinds of capacity, then, frankly, the numbers on IB, which to some extent are concealed by employment, are far lower.

That is a reflection of the fact that this Government, since 1997, have made no serious impact, if any, on regional inequalities in this country, on differential labour markets. There has been no serious attack on regional unemployment levels. This is—I quite accept and I am sure the noble Baroness will tell me this—not just a matter for her department.

However, in terms of joined-up government what is happening? The most obvious thing is that money is coming forward for knocking down houses in areas in the north and we are talking about massive further development of housing in the south-east, which will only make these regional differentials worse. I must say to the noble Baroness that this is a serious failure of this Government. If she looks at the regional distribution of the IB figures she will see that that is quite clear.

It is not often in this House that I make friendly remarks about the Conservatives, but I am bound to say that I thought that the honourable Mr David Willetts got the matter about right when he said that this is, classic new Blairism—it sounds tough, it will generate a row, the leftwingers will say it's appalling, but in the real world, it won't help".

I think that these changes are largely spin. I encourage the noble Baroness, and the Government through her, to focus on the serious underlying reasons why effective unemployment is so much higher in so many parts of our country than it is in the south-east.

I now turn to the dog that did not bark or barked only very quietly, which is pensions. The full report certainly talks to some extent about the Pension Protection Fund, the Pensions Act, the financial assistance scheme and, in particular, the new proactive Pensions Regulator. The matter is all very fresh in our minds from the detailed discussions that we had in the Committee and Report stages of the Pensions Bill which became the Act. I want to say a few words about how I believe the real test at the moment, which will be very much a test for the new proactive regulator, is whether this protection is a reality for pensioners or a cruel sham.

I refer to the case of the Allders Pension Fund, which has been widely publicised. It seems to me that on the face of it there is a very clear case. A very strong parent company with a current capitalisation of £450 million on the stock exchange— Minerva Plc is the controlling shareholder of Allders—has a substantial pension fund deficit. That is just the sort of question that we discussed on the Bill, in Grand Committee and on the moral hazard clauses. We were most concerned to ensure that that kind of company in that kind of position should not be able to walk away from its liabilities. We, from these Benches, were very keen to support the Government in taking a firm line on the moral hazard issues. I think that many people in the country will be looking with great interest at whether the new regulator will protect the pensioners of Allders.

I am bound to say that the parent company has obviously taken very careful legal advice. I have a report here from UBS. It says that in its view it is a very open question indeed on Allders, although its parent company will have to make some contribution. That will be a very practical and immediate test of just the sort of issues we were talking about as regards having a proactive regulator. The whole new system we have set up with the PPF and protecting the PPF is, I think, very much on trial. I just draw that to the noble Baroness's attention and hope that this issue will be very much taken account of and closely looked at in her ministry and by the regulator.

More generally, we now have the benefit, as I am sure she has, of the initial responses to the Pensions Commission report. The almost unanimous view from the industry is that we must focus on state pension reform and we hope very much that that message is taken on board. We note the remarks about incapacity benefit, and in particular the need to focus on the problems which we hear about from the Secretary of State—he makes warm noises and uses warm words about a citizens pension which we much appreciate from these Benches; clearly, there is nothing about that in practice here. That again will be the test of the next five years for the ministry.

3.30 p.m.

Baroness Hollis of Heigham

My Lords, I am at some disadvantage. I have only six minutes to reply to the two Front Benches. So I apologise if I do not have time to answer all the comments made. One comment from both noble Lords, which I think was exactly right, was that the issue facing the country is not unemployment; it is economic inactivity. Those who would like to be part of the labour market, but who are not in the labour market, are IB claimants on the one hand and primarily lone parents on the other.

No one raised any questions about lone parents. Let me deal first with incapacity benefit and then return to the so-called missing issue of pensions before making a couple of final points. The noble Lord, Lord Higgins. pressed me about the figures for incapacity benefit. New claims—new people coming on to IB—are down by a third. I do not want to make point-scoring remarks about the fact that the number of people claiming IB nearly quadrupled while the noble Lord's party stewarded the country; it went up by almost 400 per cent. We have steadied the total stock numbers, to use an ugly phrase; they have fallen slightly and the number of new claimants has fallen by a third.

We all accept that once people have been on IB for a year, it will probably take them several years to come off it; once they have been on it for five years. they are likely to stay on it for life. That is the issue that we are seeking to address.

The numbers will rise, but only nominally—this is why I think that Mr Willetts has genuinely misunderstood the situation—because, as the result of a previous Act covering incapacity benefit and under the influence of the noble Lord, Lord Rix, and many other Cross-Benchers, young people who were then on severe disablement allowance have been recategorised and offered the more generous terms of incapacity benefit. So the rise is partly because of the relabelling of people who are no longer on SDA but IB.

The second driver of the increase has been that the number of women qualifying with national insurance in their own right has risen by almost 137,000 since 1997, not because women have become more sick but because, instead of claiming income support with a disability premium, they are now classified under IB.

So although the number of young people and women coming on to IB will rise, that is, so to speak, a relabelling of benefit and the numbers are actually falling. So we have a remarkable record there. However, I accept that lying behind that is the issue of risk.

The noble Lord, Lord Higgins, asked me what we have done since 1997 for people on incapacity benefit and disability benefit. I shall tell him briefly. First, we introduced the New Deal for Disabled People. Secondly, we introduced working tax credit and disabled tax credit for disabled people so that, after working 16 hours, they could get a generous, or at least an adequate standard of living. We increased and changed the structure behind permitted earnings.

We introduced linking rules that take account of the issue of risk: that if you come off IB you may not get back on to your higher rate of benefit. We now allow a linking rule that we shall continue to develop so that risk is reduced. Above all, we have introduced the new Pathways, which have been shown to double the rate of entry into work from any other system.

So we have introduced more initiatives in the seven years that we have been addressing the issue in consultation with disabled people than the previous government did in the previous 18 years. So it would be appropriate—I do not mean generous, but appropriate— for the noble Lord, Lord Higgins, to recognise the huge steps that we have taken on that front.

Secondly, both noble Lords queried what they called the missing dimension of pensions. We will be producing a paper on the principle of pensions fairly soon. It makes sense to wait for the Turner recommendations, although I suggest that that will not stop all the parties laying out their manifestos for the general election. Again, let me remind the House what we have done. When we came to power in 1997, if you were asked, "Who are the poorest people in this country?", you would have said, "Pensioners". That is no longer the case. Take two people at random, one a pensioner and one not. The pensioner is now no more likely to be in poverty than any other member of the public. That has never been true since 1906; it is under us, and we are proud of it.

What is more, since 1997, pensioner incomes have risen by 19 per cent, whereas average wages have risen by only 12 per cent. In other words, pensioners, including those on the basic state pension (BSP), have had a real increase in their income over and beyond what has happened to wages. The basic state pension has risen by 7 per cent. Pension credit, introduced by us, is worth, on average, £42. Future pensioners will, I hope, have their problems reduced through the growth of a state second pension which will be worth another £40 a week, especially to women. Others in occupational pensions have not only stakeholder pensions but the greater security offered to final salary schemes under our Pensions Act 2004.

The noble Lord pressed me on the BSP and whether either the increased pension resulting from staying longer in work or a lump sum would be means tested. It will be treated in exactly the same way as the basic state pension. The noble Lord, Lord Oakeshott, would not expect me to comment on Allder's, because it is still negotiating the outcome, but I have no doubt that he will be one of the first to draw the issue to our attention if further action needs to be taken.

Finally, the noble Lord, Lord Oakeshott, said that incapacity benefit statistics reflected regional inequalities in employment. I do not deny that there is an element of truth in that, but across the country, there are about 600,000 vacancies. The number of people on jobseeker's allowance has dropped dramatically. The number of new claimants moving to IB has fallen by a third. Unemployment has reduced in all regions of the country, and by more in the poorest areas, such as the north-east, the north-west and Wales than in the south-east—obviously, there is greater scope for it to fall there.

So I hope that I have addressed the noble Lords' questions about IB, pensions and our employment record. During the past eight years we have gone from a system in which we handed out giro cheques to people who were expected to do nothing else for the rest of their lives but to bump along on a low level of benefit with nothing much to which to look forward. We have transformed that culture and will continue to do so.

3.36 p.m.

Lord Rowlands

My Lords, from my experience of the communities I know best, the New Deal has been very successful in beginning to reach out to the large number of economically inactive people in the communities that I once represented after, year in and year out for a decade and a half, watching the numbers going on to incapacity benefit or becoming economically inactive grow and grow. Does she agree that one reason why the New Deal has been successful is that we transformed an old-fashioned unemployment benefit office system into a proactive Jobcentre Plus arrangement? Will she assure us that the jobcentre will remain central to the development of our policies?

Baroness Hollis of Heigham

My Lords, my noble friend is exactly right. I should have mentioned the integration of the old benefit offices with the employment offices and, as a result, transforming the culture so that everyone who wants to should have the opportunity to work. My noble friend is right: the personal adviser structure that we introduced in Jobcentre Plus has transformed opportunities, especially for disabled people. lone parents and others who have always been marginal to the labour market. They are building on their success.

Baroness Carnegy of Lour

My Lords, can the noble Baroness tell me—the rest of the House may be interested to know—what proportion of people on incapacity benefit she feels could work, whether or not they say that they could, and what proportion of those people she hopes that this measure may catch? All over the country, there are people who see neighbours on incapacity benefit and not working when they themselves are hard-working. They feel that it is unfair that those people can continue on benefit, very likely having their rent paid for them. That seems very unfair. It will be very interesting to know what proportion she is talking about, because this is a very important measure.

Baroness Hollis of Heigham

My Lords, there are 2.7 million people on incapacity benefit. We know that 1 million of them say that they want to work. The noble Baroness is right in certain aspects of what she says. I know that the degree of incapacity is no indicator of degree of ability or willingness to work. For example, someone who is blind, wheelchair-bound, paraplegic or whatever may be committed to holding down a job and give good service. Someone else with what we might regard as relatively minor problems—minor backache, and such like—may feel themselves unable to work.

I fear that the best predictor of unemployment among people on IB is for how long they have been on IB. Doing this job, I have learnt that if you can intervene in the first year or so after people who want to work become sick and get them back to work, you do so with their good will. After the first year, instead of being anxious to get back to work, too many become anxious to protect their incapacity benefit and they start becoming risk-averse.

We understand that at least 1 million out of the 2.7 million people on IB think that they could work and want to work. There may be many more, but obviously it may not be realistic for some people who have been on IB for a long time and who have low skills and very poor health to enter work. We will ensure that such people have a decent standard of living.

The Countess of Mar

My Lords, I seek from the Minister a reassurance that I have sought from her on many occasions, both when she was in opposition and since she has been in government. It relates to those who suffer from fluctuating symptoms of illness. One day they can look and perhaps feel quite well while on another they may feel dreadfully ill. The noble Baroness mentioned a formal medical examination. Perhaps she can convey to the doctors at the Department for Work and Pensions, as I have tried for many years to do, that such people do not suffer from psycho-social behavioural problems. The literature increasingly shows that they suffer from real illnesses, the cause of which we do not know. I am referring to sufferers of ME, chronic fatigue syndrome, fibromyalgia and even Gulf War syndrome and organophosphate poisoning.

There seems a culture among DWP examining doctors of believing that it is all in these people's minds and that they can get up and go to work. Most of them are desperate to go to work and to be better but there is evidence that if they try to go to work, they will set themselves back. The noble Baroness has given me her reassurance previously in Written Answers, but I would like her continued reassurance that such people will be treated as sick, because they are genuinely so.

Baroness Hollis of Heigham

My Lords, I am certainly happy again to give the noble Countess the reassurance that she seeks. However, I can go further than she did and say that the fact that an illness is not reflected in physical biology does not mean that those affected by it are not really sick. I regard mental illness as real as physical illness. For example, when I was dealing with war pensions. we were unable always to identify the physical triggers for Gulf War syndrome, but we recognised the legitimacy of the symptoms and awarded the war pensions accordingly.

The noble Countess is right. When making a personal capability assessment it is difficult to judge people's capacity for work as their condition can fluctuate quite strongly. They may see the assessor on a good day but be more ill a fortnight or two months later. We are working with our doctors to try to address that in a decent and humane way.

Lord Borrie

My Lords, I welcome my noble friend's repetition of the Statement made in the other place. It is extremely timely, and I have no doubt that the pensions Statement to be made in a couple of months' time will be even timelier. The two Statements will provide a most useful basis on which to advance for the next Labour government who will no doubt be elected, if not early this year, later this year.

A firm basis appears in this Statement. The emphasis is on the strategy of moving people from welfare into work wherever feasible—I leave aside the many cases where it is not feasible—and removing the perverse incentives whereby incapacity benefit increases the longer you are on it, replacing those incentives with the positive incentive of opportunities for work and training where that is feasible.

Will my noble friend, first, say a few words about the penalties for not taking up work or training opportunities that may be offered? Can she reassure me that they will not have an adverse effect on young members of the family who may be dependent on a parent's earnings or benefit? Secondly, does she agree that the personal capacity assessment will become more important and that more will turn on it? Perhaps she can also say whether, after a period of time, the many borderline cases can be appealed against, or further inquiries made into them, when the facts may have altered for or against the person concerned.

Baroness Hollis of Heigham

My Lords, the noble Lord's two questions related to financial support and appeals. As I understand it, at the moment there is a success rate of about 50 per cent for appeals on personal capability assessments and of about 50 to 60 per cent on DLA assessments and AA, which is a parallel benefit. Appeals of PCAs represent about 10 per cent, and DLA appeals about 4.8 per cent, of the total caseload.

Regarded in that context, there are only a tiny fraction of appeals against the judgment. Often an appeal occurs three months or perhaps more after the original assessment, and you may be dealing with people whose conditions fluctuate, as the noble Countess, Lady Mar, said. So it is often the case that people's situation will have deteriorated or changed, or that the evidence was incomplete at the original PCA.

I think that the appeals system is working well. Although we must ensure that the evidence that we submit on appeals is as accurate as possible. we must accept that, with a disability, people's circumstances can change over three months. There may be a perfectly proper, different outcome at appeal from the original assessment, both with IB and with DLA.

On financial support, my noble friend also is absolutely right. No one who comes on to IB would be worse off as a result of our proposed changes. There will be three types of benefit. The first is the holding benefit, which is awarded for the first three months, until the personal capability assessment is carried out. It is the same level as JSA, which is what people get now. They are exactly the same. Following that, if people went on to rehabilitation support allowance, instead of getting the current £79 a week, they could get £90 a week. If their condition was so serious—for example, a terminal illness—that they could not reasonably go through the rehabilitation route back to work, they could get a disability and sickness allowance worth £100 a week, compared with the current figure of £75. The initial benefit is the same as JSA; the two subsequent benefits, either into work or for longer-term sickness, are more generous than the current level of IB. In other words, they seek to work with the grain of people's condition and their choices, not to punish them in any way.

Lord Addington

My Lords, what work is being done on the interviewing process and the staff carrying out the interviews? In this new approach that is dependent on the interview, the quality of interviewers and their level of knowledge are vital if the system is to work properly. By definition, no two incapacity benefit cases will be the same. Will there be best practice guidelines on the approach to be taken and on when expert groups should be called in from outside to give advice, be they medical or otherwise? No matter how good the intentions, if such a structure and support are not available for interviewers they will miss people and make mistakes.

Baroness Hollis of Heigham

My Lords, I need the noble Lord to help me. When he talks about interviews, does he mean those by Jobcentre Plus staff or those by doctors carrying out personal capability assessments?

Lord Addington

My Lords, I refer mostly to the initial interviews at Jobcentres and how help is called in from there. Most help and support is needed at that initial interface.

Baroness Hollis of Heigham

My Lords, we have invested hugely in training. If there is any appeal against the original Jobcentre Plus determination—in other words, that people should stay on JSA—it will be rechecked by a senior decision-maker in that department and the case will then go through for medical evidence. If the noble Lord has any evidence that the process is unsatisfactory, I would be glad to have it.

Baroness O'Cathain

My Lords, how many people are covered by the five-year strategy? It seems to deal solely with people on incapacity benefit and lone parents. The noble Baroness has said that there will be another pensions element, but, as the noble Lord, Lord Oakeshott, said, that really is the tail wagging the dog. If she could answer that, I would have some idea of the numbers involved.

How many trained professional advisers are going to be required by the Department for Work and Pensions? It seems to be a convoluted process. First. the jobseeker's allowance will be paid to people going off incapacity benefit for 12 weeks while they are evaluated. But they will be evaluated, first, on a medical assessment; secondly, on a personal capability assessment; and thirdly, on an employment support assessment. The Minister is shaking her head. I did not have the benefit of the Statement, which was extremely dense, but I would like to know.

How many new trained professional advisers will there be and what will be the cost of them?

Baroness Hollis of Heigham

My Lords, we think that we may need to train to 1,000 additional advisers for rolling out Pathways to Work. Some 2.7 million people are on incapacity benefit. About 900,000 lone parents are on benefit. We have not compiled a specific section on pensions, so the 11 million or so pensioners in the country will be covered subsequently by a separate document. Our strategies for JSA claimants are clearly working. We have not addressed that issue particularly.

The noble Baroness pressed me on resources more generally, which was one of the thrusts of the speech of the noble Lord, Lord Higgins. We have made it very clear that when we introduced Pathways to Work for the current pilots of 10 per cent, additional resources were found through the Pre-Budget Report. We are expecting to roll the scheme out to cover one third of the country and additional resources have been committed in the Pre-Budget Report. We expect, in the general framework, to fund the programme through existing resources, but that will depend on the outcome of the spending review 2006. Of course. we are some way from that.

Lord Lea of Crondall

My Lords, I congratulate the Government on squaring a number of circles at the same time as establishing the long-term aspiration of moving towards an employment rate of 80 per cent, with all the attendant benefits for the country's prosperity, not least for pensioners. Indeed, this is the key to sustainably rising pensions. Will my noble friend confirm one point; namely, that no disabled people will be financially worse off as a result of the Government's proposals?

Baroness Hollis of Heigham

Yes, my Lords. I am delighted that my noble friend shares with me an aspiration for 80 per cent employment, which means bringing into the labour market people who have been economically inactive, whether as lone parents or as people suffering from a disability. To use an overworked phrase, it is a very challenging target, but if we can meet it, we would not only mainstream those people in ways that are decent but would do a huge amount towards lifting them out of poverty during their working life and prevent them passporting poverty into their retirement. The best protection against poverty in old age is a decent job when you are of working age. In that sense, the 80 per cent target will not only reduce inequalities and poverty but will help to mainstream people in ways that all of us would want for ourselves.

As for the point about no disabled person being worse off, that is absolutely right. As I have said, in the first few months, they will be on the same rate as now. For the rest, they will be £15, £20 or £25 a week better off than now. We are offering financial support while trying to remove some of the risk that has conventionally accompanied disabled people's fears about moving into the labour market. We have to address that issue. It is a real issue, as the noble Lord, Lord Higgins, said, which is why issues such as linking rules and permitted earnings will continue to need to be scrutinised.

Lord Dykes

My Lords, I was called out briefly during the exchanges after the Minister repeated the Statement, so I hope that I am in order in coming back and asking a brief question. As an external consequence of the measures, which are to be welcomed, does the Minister welcome the fact that we will now get a much more accurate representation of the real unemployment figures in the future, which will also help her and other members of the Government in the prosecution of the Freedom of Information Act?

Baroness Hollis of Heigham

My Lords, I am not sure about the connection to the Freedom of Information Act. I am sure that there is a twist there that, in my innocence, I am missing.

I accept that, for too long—until at least the later 1990s —unemployment benefit was replaced by what was first called invalidity benefit and then became incapacity benefit to conceal long-term unemployment, particularly in areas in which there was and still is high unemployment due to the decline of the heavy industries. We are working with GPs on that, but I emphasise again—the point was raised by the noble Lord, Lord Oakeshott of Seagrove Bay—that, although I accept that there are different opportunities in different regions, it should not escape us that the number of job vacancies is not that disparate throughout the country.

There are jobs, particularly for disabled people, who will get a full disabled person's tax credit to top up 16 hours' work a week. There are a lot of jobs and a lot of part-time jobs. Conventionally, they have gone either to women who are lone parents, but they could also go to disabled people, supported by tax credits that mean that they take home a decent income. I hope that the noble Lord will help us to spread the message.