That this House regrets that Her Majesty’s Government have laid before Parliament the Social Security (Housing Costs Special Arrangements) (Amendment) Regulations 2009 (SI 2009/3257) without providing more information on the impact on claimants, and notes with concern the risk that Parliament may lack a basis on which to assess whether the measure has been effective or represents good value for public money.

Relevant Document: 5th Report from the Merits Committee.

My Lords, I have laid my regret Motion today to give the House the opportunity to discuss the issues raised in the 5th report of the Merits of Statutory Instruments Committee. The committee’s report made clear in its summary that there were significant concerns with the explanatory material surrounding this statutory instrument. Money has been both paid out and withheld in opposition to the policy intention. To compound the confusion, there is a complete lack of certainty about the number and magnitude of these errors.

I am sure we would all admit that the benefits system is now appallingly complicated. Trying to define how different benefits impact on each other is a task that I doubt many would undertake with enthusiasm. However, that is no reason for such a task not to be undertaken. I am glad that the department offers training sessions to welfare agencies to explain changes in the rules. I wonder whether the Minister could fill us in a little more about these sessions. How frequent are they? Are there routine refresher courses, or are they limited to the areas in which there have been new regulations?

Of course, an obvious way to reduce the need for these courses would be to reduce the number of changes made to the regulations. From the committee’s report, it is apparent that the Minister's department has not met the usual standards expected in regard to secondary legislation. I wonder whether he can tell me how many pieces of legislation have been produced in recent years by the Department for Work and Pensions that correct errors or clarify confusions in earlier Acts or statutory attachments. Such unnecessary work not only for this House and its committees but also for the department and, of course, the agencies tasked with implementing the rules would be much reduced if the department got it right first time. In future, I hope that the Government will take more care.

It is unfortunate that even after the Parliamentary Under-Secretary of State was hauled over the coals for errors and lack of information, the Explanatory Memorandum tabled with the regulations contains trivial errors. It lacks the necessary reference to the related SSAC report, for example, although a space has clearly been left for the information to be inserted. That is a small point and one on which the Minister's office has been extremely helpful and prompt in rectifying, for which I thank him.

When such mistakes are made, one can sympathise with the chairman’s evident frustration with the quality of information with which he was provided during the evidence session in January. The Parliamentary Under-Secretary indicated that she would be reviewing the relevant procedures when she answered the committee. I hope that the Minister will be able to tell us how that review has gone. Have any changes been made to stop these sorts of problems happening again?

I wonder whether the Minister will be able to give us a little more information on the detail of the errors which this SI is to rectify. In January it was thought that between 50 and 100 households could have taken advantage of the loophole but that none actually did. Is that still the case, or has any further information come to light? The cases of underpayment are much worse. A cumulative total of £17.2 million was suggested in the evidence session. That is a significant sum and one which was much exacerbated by the length of time it has taken the department to correct the error. Can the Minister give us an estimation of how much the extra statutory scheme will cost before all the money has been paid and how long does the Minister expect that to take? Will recipients be expected to apply for their entitlement or will the department do the work of seeking them out and giving them the money?

This entire episode has not reflected well on the Government. Although I am quite certain that the wider world will remain sublimely uninterested in such technical failings, I hope that the Minister can assure me that such a consideration will not prevent the necessary steps being taken to prevent similar occurrences in the future. I beg to move.

My Lords, I support the Motion tabled by the noble Lord, Lord Freud. He is absolutely right to table it and all his questions are pertinent and important. Some may be technical but they go to the heart of enabling us to discharge our duty to scrutinise these very technical issues.

In the atmosphere in which this original decision was taken—probably by the then Secretary of State, James Purnell—the instinct was right. The policy intention of trying to protect people from losing their homes was absolutely right. In 2008, when these decisions were originally taken, there was a possibility not only of people running the risk of losing their jobs but also of the tragedy being compounded by them losing their homes as a direct result of something not being done. Earlier evidence from earlier recessions suggests that that was a real risk. The ministerial decision was right at the time, but everything else after that seemed to go wrong.

Maybe there is a point to be made about the flow of Ministers through the department. They hold office for 15 months, if they are Secretaries of State, and if they are lucky. We have had 20 or so Ministers for Pensions with almost the same number of Parliamentary Under-Secretaries. The advice I would give to the department, and one of the lessons that we learnt from this set of mistakes, is that the professionals in the department should say, quite firmly, to Ministers, “Okay you have the authority to make the decision that something has to be done in this area”. Then they should be quite firm about the timetable and how the process is managed. There should not just be a press release and another initiative with Ministers taking the credit for making what they believe is the right decision. The department has to feel more confident about saying, “We will do this for you but we are going to do it the right way, and not in a way that will land you in trouble later on”. The intention was wholly right and supportable. However, by grabbing at it in a way that I suspect was driven by a political timetable, things went seriously wrong.

I want to add to the list of questions. What worries me most in the long term is that the department is now introducing two-year temporary time limits on substantial benefits by statutory instrument, without consultation. That is a disturbing precedent—there is no other adjective—and I want an assurance from the Minister that wholly exceptional circumstances led to that. Again, I suspect that it was driven by Mr Purnell for whom I must say I have a great deal of time, even though I have just criticised him. The two-year temporary provision was not necessary. As far as I have read the papers there was some £5 million a year, I think, at stake in terms of the temporary nature of the provision. The Minister might clarify that as I could not make sense of what it would cost to have run it on beyond two years. The combination of the temporary provision and the lack of consultation is worrying.

We all know that the benefits system is ineffably complicated but the defect at the heart of these regulations is the fact that somebody could artificially come out of a claim, make a new one and take advantage of the higher benefit levels. That is not an intrinsically complicated part of the benefits system but the kind of thing discussed in the corner of the bar of the Dog and Duck every Friday night. You need not be a highly paid departmental lawyer to work out that maybe people will take advantage of that, and it should have been entirely foreseeable. I do not accept that this is some complicated bit of legal text whose consequences people did not understand. Anybody who had given two seconds’ thought to bringing in the regulations in this way could see that artificially breaking the claim to come back in and get more money was a foreseeable risk. That was pretty shocking—I expect the department to be better than that. To describe it, as the Parliamentary Under-Secretary of State did to the Merits Committee, as an immensely complicated exercise which led to the mistake, is just wrong.

There was an inadequate response to the Merits Committee report, which I read carefully. The chairman in a very gracious way made it quite clear that the committee was absolutely fed up at how it had been treated by the department. The noble Lord, Lord Freud, was right about that. I noticed that the Parliamentary Under-Secretary of State rather fingered the Permanent Secretary by referring to him at least three times and saying that he was instituting training. Latterly, the Merits Committee found out that the people who made the mistake had gone through the training anyway, which is an interesting vignette in itself.

The Permanent Secretary must get a grip on this. If anyone is called in future by the Merits Committee to explain similar circumstances I hope that they will ask for Mr Leigh Lewis to appear in person and explain himself. He is an experienced and good Permanent Secretary but he must carry the can for this. The Merits Committee was right to exhibit displeasure and I hope that it will continue to do so. By the way, I hope that the training is now in place for everybody in future who gets anywhere near this kind of stuff.

Another point is evaluation. Having read these papers carefully, I do not think that there is any chance of evaluating the effectiveness of this policy at all because there are no baselines of any kind. It is not a huge spend—I accept that, particularly since it is time-limited—but it is impossible to evaluate the effectiveness of this increased amount of public money as there is nothing against which to measure it. That is regrettable.

I do not want to read too much into this but there was an exchange in the Merits Committee between Mr Howarth, who is the lawyer, at page 31, when he was asked by the noble and learned Lord, Lord Scott, about extra-statutory payments. He seemed to suggest—and I am really looking for an assurance that this is not the case—that extra-statutory payments were okay as long as they were within the Treasury budget limit for the programme cost. I do not think that the House can accept that. Extra-statutory payments—gratuitous payments—by the department are wholly exceptional. For the department to say, “Never mind, we can pay money gratuitously to people because it doesn’t bust the amount of money the Treasury has given us to do this”, is completely unacceptable. I may be reading too much into the sentence at the bottom of page 31 in the Merits Committee’s fifth report but I would not mind a reassurance that we are going nowhere near that kind of territory. If we are, the House will want to know more about that, and rightly so.

The SSAC and the Merits Committee have both done an excellent job. To come back to an important point made by the noble Lord, Lord Freud, I am a DWP watcher and had an immense amount of difficulty from home in tracking down the SSAC document, as it did not have a number. I do not think that that is the fault of the SSAC, but is something to do with the fact that HMSO or TSO are tardy when it comes to putting reference numbers on documents. The document that I eventually found had no number on it anywhere. If people are doing their best they can to keep up with some of these technical arguments, a good way of confusing them is not to give references or links to documents that people can understand. These were complicated circumstances concerning an amended set of regulations that we were amending. It was not easy even for somebody like me, who has been following these things for quite some time.

The SSAC also put its finger on an important point. There should be a fundamental review of homeowners’ costs in future. Anybody who thinks that homeowners will be trading themselves out of repossession territory within the next two years misunderstands the dilemmas, financial and economic difficulties that the country will face in the next comprehensive spending review period. Two years will just not do it. Therefore, we should be looking at how we spend money to support these people in future. I cannot understand why we did not just flush the extra Treasury money through the existing system. Of course, that would have meant people waiting for longish periods, and there are benefits of the new system. I absolutely understand that. But if people—particularly debtors or people threatened with repossession—knew that there was this amount of money flushed through the old rules, it would have given them a lot more comfort and the same effect would have been achieved without all this complexity. This has not done credit to anyone. We seem to have snatched defeat from the jaws of victory, with a good policy going horribly wrong because of how it is administered.

I finish where I started. I think that this was the right thing to do, but I hope that we will learn lessons. The noble Lord, Lord Freud, is absolutely right and has done a service to the House by bringing the regulations to our attention so that we can examine them and try to learn lessons so that such things do not go wrong in future.

My Lords, I start by thanking the noble Lord, Lord Freud, for bringing forward the Motion, which has given us a chance to discuss the issues. I have listened with great interest to the points that have been made.

I am bound to say that I found the contributions a little unbalanced. In particular, it was difficult to understand the criticism about process. There was no great recognition of the substance of the regulations. Perhaps I can start by explaining why the Government introduced the regulations.

The changes to the support for the mortgage interest scheme were announced on 2 September 2008 as part of a major cross-government package of new measures to meet the challenges in the housing market at that time. Doing nothing would have increased the risk of homeowners losing their homes. Although we initially intended the regulations to come into force in April 2009, we decided to bring forward their introduction to January 2009 in the light of the increasing and fast-moving effects of the economic downturn. We thought it important that working-age benefit customers with mortgages got that additional help as quickly as possible. The changes were therefore in place from 5 January 2009. The changes doubled the capital limit for loans up to which support for mortgage interest is payable from £100,000 to £200,000 for new working-age customers. They reduced the waiting period for mortgage help for new working-age customers from 26 or 39 weeks to 13 weeks from 5 January 2009, and they also introduced a two-year time limit on the payment of support for mortgage interest for some income-based JSA claims—I will come back to that point in a moment.

In addition to those changes, the Chancellor announced in the Pre-Budget Report in November 2008 that the standard interest rate would be maintained at 6.08 per cent for six months. The standard interest rate is used to calculate the amount of help available by applying it to the eligible capital outstanding on a customer's mortgage. The rate applies to all support for mortgage interest customers, both existing and new, including those claiming pension credit.

In the Budget of April 2009, the Chancellor announced a further extension to the 6.08 per cent rate for a further six months. In last December’s Pre-Budget Report, he announced another extension of that rate until the end of June this year. He also said that we intend to move towards a fairer, more affordable approach that more closely reflects the mortgage interest rates being charged to customers. That will help to ensure that support for mortgage interest is appropriately targeted as housing market conditions improve.

Of course, we always keep arrangements under review to ensure that they work well. For example, some customers have always had interest rates below the standard interest rate, but we have recently started to receive increased volumes of inquiries about access payments of support for mortgage interest. As a result of the standard interest rate, people receive more support for mortgage interest than is needed to cover their actual interest payments. I am pleased to use this opportunity to tell the House that we will lay regulations tomorrow to ensure that support for mortgage interest payments made to lenders can be applied only to customers’ mortgage accounts. Establishing that central principle in legislation reflects our overarching policy that support for mortgage interest is intended to help to prevent repossessions, and that any excess SMI should be used to reduce the mortgage liabilities for individuals, and thus future cost to taxpayers.

Fundamentally, by introducing these measures we wanted to provide help for homeowners at a time of great pressure for many of them. We believe that it was right as a matter of urgency to protect those most at risk of losing their homes. Although I agree that it is always helpful fully to understand the likely impact of any regulations, there are circumstances when that is simply not possible. At the time, given the changing economic situation and the pressure on the financial system, there was concern that a waiting period of 39 weeks was too long. Many customers may have been subject to foreclosure proceedings before they became eligible for support. The capital limit of £100,000 was outdated, given that by 2008 the average house price in the UK was closer to £200,000.

Without reform to those elements of SMI, many families may have found that the support that they would have received would have been too little, or too late, to prevent their home being repossessed. We stand by the decision to introduce the regulations swiftly. If we had not introduced them as soon as possible, customers would have had to wait until April 2009 to benefit from the changes. Instead, as a result of our action, customers benefited from the changes from January 2009, at a time when the effects of the economic downturn were being felt by many hard-working families. That was the right action to take.

By introducing the whole package of measures, we estimate that we have provided an additional £700 million in support to about 220,000 households at risk of repossession. We believe that that support, as part of a wider package of measures, has helped to keep the number of repossessions lower than was originally feared. It should also have helped to prevent a considerable number of families falling into arrears with their mortgage accounts, which, in many cases, may have led to long-term financial difficulty or being forced to sell their home.

The changes have been broadly welcomed by all key stakeholders. There is widespread acknowledgement that they have been effective in supporting the poorest homeowners in the recession and preventing repossession. The Council of Mortgage Lenders said in its budget submission last week:

“We believe that a combination of lender forbearance, low interest rates, lower than expected unemployment during the recession”—

I will not dwell on today's encouraging figures—

“and a variety of government schemes has helped keep mortgage possessions in check and will continue to do so. Having originally forecast 75,000 possessions in 2009, similar to levels seen at the depth of the last recession, our recently published data showed that there were, in fact, 46,000 cases during the year. We have predicted 53,000 possessions in 2010 but have already said that, while we cannot be complacent about mortgage payment problems, our forecast looks a little pessimistic”.

A number of other stakeholders have acknowledged that the changes have had a real impact in supporting homeowners and preventing repossessions. They include Citizens Advice, the Building Societies’ Association, Advice UK, the Money Advice Trust and Shelter.

To introduce the regulations as quickly as we did, it was necessary to bypass our statutory consultee, the Social Security Advisory Committee. The department values highly the contribution made to policy development by SSAC. We of course take into account views expressed by commentators on consultations undertaken by the committee. We are committed to consultation processes. We believe that stakeholders and others outside DWP have an important contribution to make to the formulation of policy. However, in this instance, after careful deliberation, the Secretary of State decided not to refer the regulations to the Social Security Advisory Committee, in accordance with the statutory provision, because he believed that it was inexpedient to refer the proposals, due to the urgency of the matter.

That decision was not taken lightly. Had we followed the normal process, the introduction of the regulations would have been delayed by many months—which, as I have explained, would have put homeowners at risk. Ideally, we would have consulted publicly on the regulations before they came into effect, but, on balance, we thought that it was important to get help to people as quickly as possible. We subsequently referred the regulations to the Social Security Advisory Committee in January 2009, and it decided to consult on them. We responded to that consultation in December last year.

The regulations came into effect on 5 January. They clarify how some of the temporary rules that I have described operate in practice and correct a few anomalies in the earlier regulations. They also implement a Social Security Advisory Committee recommendation regarding what we refer to as excess income over requirement cases. This will ensure that the new rules introduced in January 2009 are extended to customers who first claim a relevant benefit on or after 5 January 2009 but who are not entitled to that benefit until the support for mortgage interest component becomes payable. Jobcentre Plus staff are contacting customers who are affected by this amendment—that is one of the points that the noble Lord raised—so that where appropriate they can receive the more beneficial help. However, as this cannot apply retrospectively, the department is setting up an extra-statutory scheme to address any potential shortfalls, of which it will publish details in due course.

The noble Lord, Lord Kirkwood, gave the impression that, simply because there was a bit left in the budget, the department was happy to have lots of extra-statutory payments floating around. That is not the case. There was a situation and there was a policy objective. It was not possible to do this retrospectively so we did it through the extra-statutory route. A very clear policy underpins the approach that was taken.

I stress that all these changes were introduced on a temporary basis in response to the economic downturn and will be reviewed when conditions are more favourable. The purpose of this policy is to support people who lose their jobs in the current economic downturn and to prevent repossessions. This package of measures needs to be assessed against that. We have committed to conducting a full evaluation of the reforms to the support for mortgage interest component by the end of 2010. The aim of the evaluation is to assess the impact of the various changes introduced in January 2009—for example, assessing the number of people affected and the associated costs, as well as investigating the impact of particular subsets of the SMI population.

I will try to deal with the points that were made, but I hope that noble Lords will forgive me if I do not do so in the order in which they were raised. The noble Lord, Lord Kirkwood, referred to training for officials on process, as did the noble Lord, Lord Freud. We fully accept the point about the need for adequate training. We have introduced more training. The Permanent Secretary has stressed its importance, as I do, because the point is well made.

The noble Lord, Lord Freud, referred to the complexity of the benefits system. We have discussed that before and talked about what we have done in seeking to make it less complicated and to simplify it. The reality is that moving towards a more straightforward system takes time and there are costs along the way, but we share the aspiration of a single working age benefit.

Both noble Lords referred to the Explanatory Memorandum. The reference to the Command Paper in the Explanatory Memorandum was intended to be removed but was unfortunately overlooked. The department has responded to the Social Security Advisory Committee’s reports by way of Command Papers for many years, but officials were advised at a late stage that it would be appropriate for the department to respond by way of an Act paper. As Act papers are not numbered, the reference should have been deleted. Also, as Act papers are not published on the OPSI website, the link should have been amended to say that the papers are available on the Stationery Office website. I would be happy to write to noble Lords further if that would help on that point.

The noble Lord, Lord Freud, asked about the number of people involved in what he described as errors. Here we are dealing with the cases involving excess income over requirements and the adjustment of the arrangements that causes extra-statutory payments to be applied, rather than the specifics of the regulations. The total number of people listed on the clerical records kept by Jobcentre Plus offices is 2,263. The noble Lord asked about some of the detail of training. I do not have that detail to hand. However, the department holds a regular forum for stakeholders, including welfare rights organisations. Where training is required, we discussed how it can best be delivered. He also asked about the cost of error. We do not have the cost because we do not know how many people will subsequently become entitled until we assess the new claims.

The noble Lord, Lord Kirkwood, asked about the introduction of a two-year limit for JSA customers. I think that the import of his remarks was that it sets a worrying precedent. I stress again that the package of measures is temporary and has a time-limiting aspect; it is not intended to set a precedent. The entire package will be reviewed once housing market conditions are more favourable. We did not decide to make these changes lightly, or to bring them in quickly, but difficult times called for swift action. The current data show that 96 per cent of claimants leave JSA within 24 months. The first time at which this requirement could impact on a JSA claimant would be January 2011.

My Lords, I thank the Minister for that very full answer. I should make it clear, as I hope I did in my earlier remarks, that he and his department have been immensely helpful in this process.

Like the noble Lord, Lord Kirkwood, I acknowledge that this initiative was welcome and that very few people who had to heart the concerns of people who had lost their jobs would think that the initiative was poor. Clearly it was a very difficult period and there was a lot of fear around, so the package was appropriate for the time. However, as a result of the rush and the urgency, some of the processes were less than satisfactory, which I think the Minister has acknowledged in practice.

We have learnt quite a lot about the Dog and Duck from the noble Lord, Lord Kirkwood, which is one aspect of the matter, but the real lesson is the importance of keeping a grip on these rushed initiatives. If these things become too loose in an overly complicated benefit system, you can lose control very quickly. I yield to no one in my admiration for Sir Leigh Lewis of the DWP, who I think is an excellent Permanent Secretary, but I think that he would have to acknowledge that Homer nodded a little on this.

When there is a rush to get something in, it is important that we remember to ensure that we keep things as tight as possible. That is the main point that I would like to make after this rather interesting discussion. As I said at the beginning of the debate, I moved this Motion to have a useful discussion, which I think we have had. On that basis, I beg leave to withdraw the Motion.