Thursday 10 March 2022
Arrangement of Business
My Lords, Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking. If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Scotland Act 2016 (Social Security) (Adult Disability Payment and Child Disability Payment) (Amendment) Regulations 2022
Considered in Grand Committee
My Lords, I beg to move that the draft Scotland Act 2016 (Social Security) (Adult Disability Payment and Child Disability Payment) (Amendment) Regulations 2022, laid before the House on 24 January 2022, be approved. I am pleased to introduce this instrument. Subject to approval, it will make some necessary legislative changes to prevent overlapping entitlements of the soon-to-be-introduced Scottish adult disability payment, with UK disability benefits.
In consequence of the Scottish Government’s child disability payment, very similar regulations were made in July 2021. As these regulations mirror, in relation to adult disability payment, much of the policy intent and technical application of the previous instrument, I hope that noble Lords will forgive me if I repeat much of what was said during the debate on those previous regulations. My honourable colleague the Minister for Disabled People, Health and Work brought this instrument before the other place on Monday, so there is little new to outline in my opening remarks. I am satisfied that the Scotland Act 2016 (Social Security) (Adult Disability Payment and Child Disability Payment) (Amendment) Regulations 2022 are compatible with the European Convention on Human Rights.
The UK Government are committed to making devolution work and to ensuring the transition of powers to the Scottish Government under the Scotland Act 2016. This is a long-standing commitment. As a result of the devolution of social security powers to the Scottish Parliament under this Act, the Department for Work and Pensions will need to update its legislation from time to time to reflect the introduction of the Scottish Government’s replacement benefits. Section 71 of this Act allows for the necessary legislative amendments, in this case as a result of benefits introduced under the Social Security (Scotland) Act 2018.
I am grateful for the opportunity to debate these regulations today. They will effect some purely technical, administrative changes. They will prevent overlapping payment of the Scottish adult disability payment and UK disability benefits such as the personal independence payment and Armed Forces independence payment. The instrument also includes some time-limited overlapping provisions for Northern Ireland.
Noble Lords will be aware that the Social Security (Scotland) Act 2018 established the legislative framework for the Scottish Government to introduce new forms of assistance using the social security powers devolved under Section 22 of the Scotland Act 2016. Specifically, Section 31 of the 2018 Act allows the Scottish Government to introduce legislation to provide financial support through its disability assistance for people in Scotland with long-term additional health needs.
The Scottish Government recently legislated to provide for its disability assistance for working-age people, which will be introduced from the 21st of this month. They are calling this “adult disability payment” and I will refer to this as ADP from now on. If the regulations are passed today, they will ensure that there are clear boundaries between entitlement to ADP and entitlement to a relevant UK Government benefit to ensure that there is no overlapping provision of payments. It will do that by making it clear that a Scottish resident cannot be entitled to a relevant UK Government benefit and that in the case of those who move cross-border, a DWP payment will not start until the day after payment of ADP has ended. This will not only protect the public purse by avoiding double payment to the same claimant for the same need but help prevent the need for complicated overpayment calculations and recovery. Furthermore, it is also in the best interests of the claimant, who will have clear expectations of which Government are responsible for paying their benefits at which point in their claim or award.
As just noted, as part of the offer, although ADP has residency-based conditions attached, the Scottish Government will continue to pay ADP for a period of 13 weeks after a claimant has left Scotland and moved to another part of the UK. This will allow claimants time to sort out new benefit arrangements, should they wish to, and the instrument sets out that a successful claim to a UK Government benefit will start the day after the end of that 13-week period.
Our intention is to offer later this year a similar facility for those moving to Scotland, and this is not the subject of these regulations brought before this Committee today. What are needed now are modest but necessary legislative amendments to avoid overlapping payments in order to both support the devolution agenda and strengthen a union that works together in the best interests of our shared citizens. The instrument also includes provisions on behalf of the Ministry of Defence to ensure that Armed Forces independence payments will similarly not overlap with ADP.
Finally, provisions have been included to prevent overlapping entitlement when a claimant moves to Northern Ireland and is in receipt of the 13-week run-on payment from the Scottish Government. I commend this instrument to the Committee.
My Lords, I thank the Minister for introducing these regulations. As we have heard, following devolution of responsibility for certain social security benefits, the Scottish Government are introducing ADP for applicants ordinarily resident in Scotland. It will start to replace personal independence payment, PIP, in Scotland from this month.
The primary purpose of these regulations, as the Minister has explained, is to prevent overlapping payments of attendance allowance, DLA, PIP or Armed Forces independence payment when a claimant is getting ADP. We support the instrument and are pleased to see the Scottish Government using the powers transferred to them under the 2016 Act and subsequent legislation—although I express a bit of disappointment that it has taken such a long time for this to happen. It is critical that the rollout of ADP goes well, and that the transition from the current regime is smooth. Since these regulations are part of that process, we want to see them succeed and are pleased to support them.
The Minister mentioned that ADP will carry on being paid for a period of 13 weeks following a move from Scotland to England or Wales or Northern Ireland, to allow the claimant time to make a claim for the relevant benefit. When the Social Security (Scotland) Act (Disability Assistance and Information-Sharing) (Consequential Provision and Modifications) Order 2022 was discussed in the other place on 2 March, the Minister Iain Stewart said:
“At its introduction, adult disability payment will operate in broadly the same way and for broadly the same group of people as personal independence payment.”—[Official Report, Commons, Delegated Legislation Committee, 2/3/22; col. 3.]
So can the Minister tell the Committee whether the conditions for eligibility for ADP are the same as they are for PIP, or will someone moving from Scotland to another part of the UK have to undergo a fresh assessment to get PIP? If they do have to be assessed, is that classed as an assessment or a reassessment? There is a distinction in terms of time, as the Minister will know, and priority for processing a claim.
The Minister Iain Stewart also said:
“The 13 weeks is a safety net, and applications can be made in advance. It is there to ensure that payments can continue if there is some delay, so that no one is disadvantaged.”—[Official Report, Commons, Delegated Legislation Committee, 2/3/22; col. 8.]
The intention clearly is that there should not be a gap in payment between somebody moving from Scotland on ADP and coming to England, say, and claiming PIP. So can the Minister tell the Committee how long it takes to process a claim for PIP? Is she confident that 13 weeks will be long enough to ensure that there is no break in payment?
I dug out what I think are the latest official statistics, which were for last October, and which showed that clearance times for normal-rules new claims were 24 weeks from registration to a decision being made—and that is assuming the claimant was not one of the millions who end up having to go for mandatory reconsideration to get their benefit established in the first place. That adds another 11 weeks to the process. So can the Minister tell the Committee whether this means that, if someone moves from Scotland to England—just across the border, say, to Berwick—then makes a claim, and it takes either 24 or potentially 35 weeks, they will still get only 13 weeks’ run-on? What happens to them during those remaining weeks when they are still waiting for their claim to be processed? Also, does the comment by Iain Stewart about applications being made in advance mean that someone preparing to move from Scotland to England or Wales could make a claim for PIP while they were still living in Scotland in advance, as they prepared for their move to England—again, to avoid any gap in payments? That might deal with the problem that it takes longer than 13 weeks to process a claim.
I understand that applications for ADP will open at different times in different parts of Scotland. I think it will be piloted in some parts. Does the Minister know when it will be fully rolled out? If somebody were to move now from England and they happened to land in the bit of Scotland where it is being piloted, presumably they would have to make a fresh application for ADP. The Minister mentioned that the intention of the Government was to arrange this so that the run-on is a two-way street—so that, in due course, if you move from England to Scotland, you will get a 13-week run-on of PIP while you make an application for ADP. In fact, Iain Stewart said in the Commons that
“the situation does apply both ways. If a person in England claims PIP or one of the other benefits and moves to Scotland, the DWP would look to ensure they had an equivalent transition period.”—[Official Report, Commons, Delegated Legislation Committee, 2/3/22; cols. 7-8.]
But if somebody on 1 April were to move to Scotland and happened to be in an area where they had started doing ADP, would they get a run-on or no run-on? Would they suddenly find that their PIP stopped immediately and they had no benefits at all until their ADP was processed?
Finally, the Minister said something about the regulations also introducing some time-limited overlapping provisions for Northern Ireland. Can she tell us what they are, because I could not figure it out? I apologise for that and look forward to her reply.
My Lords, I thank the noble Baroness, Lady Sherlock, for the points she has made. I shall try to deal with them.
I turn first to what happens to a person if they move now. While DWP is administering the existing disability benefits on behalf of the Scottish Government under agency agreements, any customer moving to Scotland will be handled as a routine change of circumstances. This means that these cases will continue in payment on the same benefits as now and form part of the Scottish caseload administered on behalf of the Scottish Government. DWP will continue to manage their claim until they are transferred to Social Security Scotland. The case transfer process has been agreed with the Scottish Government and claimants will not see any disruption to their payments.
The noble Baroness asked why the regulations include provisions for Northern Ireland. Social security in Northern Ireland is a devolved matter. The inclusion of provisions for Northern Ireland has been agreed with the Department for Communities, as it does not have the powers to make these necessary amendments because matters relating to the Scotland Act are outside the legislative competence of the Assembly. However, what has come to be known as the parity principle contained in Sections 87 and 88 of the Northern Ireland Act 1998 provides for a single system of social security in line with the DWP. As such, the UK Government can agree to legislate on behalf of Northern Ireland at the request of its Ministers.
Including Northern Ireland amendments will ensure as consistent an approach as possible and minimise disruption for claimants in receipt of ADP moving to Northern Ireland from Scotland. The Northern Ireland provisions are narrower, in that they will prevent duplication of disability payments only during the period when the Scottish Government pay their 13-week run on following a move from Scotland to Northern Ireland.
The noble Baroness asked what will happen when a claimant moves from England and Wales to Scotland once the agency arrangements have ended. We intend to provide a similar payment run-on to that offered by the Scottish Government. We recognise that people need time to sort out their financial affairs when they move, including making new claims to benefits. This provision will not be needed until all cases for the relevant benefit have been transferred to the Scottish Government. We are currently completing policy and legislative work on this.
The noble Baroness also asked what safeguards are in place for the transfer process for those currently on PIP. The UK and Scottish Governments are committed to ensuring safe transfer of powers and claimants between their agencies. DWP will continue to administer individual cases through agency arrangements until the Scottish Government are ready to take over payment. Both Governments are working closely on the practical and technical issues associated with the transfer of cases and data, ensuring that processes and data are safe and secure.
The noble Baroness asked what the Government are doing to reduce the time it is taking to clear a new PIP claim. This is not what we are here to debate, but we are committed to ensuring that people can access financial support through PIP in a timely manner. However, I accept that the current average time that it is taking to clear new claims is far too long. That is why we are using a blend of phone, video and face-to-face assessments to support customers and deliver a more efficient and user-centred service; where it is safe to do so, we are making in-house decisions without referral to the assessment providers; we are increasing case manager and assessment provider health professional resource; and we are prioritising new claims while safeguarding the continuity of existing awards.
The noble Baroness asked what will happen when a claimant in receipt of Scottish disability benefit moves from Scotland to England or Wales. Once the claimant notifies Social Security Scotland of their move, the Scottish Government will write to them to advise that they will continue to be paid ADP for a period of 13 weeks following the move and that they will need to make a claim to the DWP for a UK disability payment such as PIP if they so wish. The DWP and the Scottish Government are working collaboratively to ensure communications to claimants will be clear.
If the claimant is late in making a claim following a move, there is a greater risk that there will be a break in payment. However, arrears will be paid back to either the date of claim or the date the run-on ceases, depending on circumstances. If a claimant delays making an application and their ADP stops before their claim has been made, any new claim can be paid only from the date of that claim. The payment of a 13-week run-on from the Scottish Government following a move will reduce the risk of claimants experiencing a break in payment. It is, however, the claimants’ responsibility to make a claim to DWP for PIP following a move to England or Wales and to do so as early as possible to reduce the risk of seeing their payments stop.
I believe that the noble Baroness was very keen for us to say that PIP is taking far too long, and with the 13 weeks there might be a break in payment. If she will allow me to, I shall go back to the officials to get more detailed information, in the hope that I can answer her question in full.
I am grateful for the considerable information that the Minister has given me. In fact, I was not asking or generally complaining about PIP being slow, which is what she said. I do think that it is too slow, but that was not my point; my point is that everything about the description of ADP suggests that the intention is that there will not be a break in payment. The Minister in reply to me has just said that the 13-week run-on will reduce the risk of a break in payment, but it is the claimants’ responsibility to apply quickly. As she seems to be suggesting that a claim cannot be made until the claimant has actually moved to England, and if there is only a 13-week run-on, and even if she applies on day one, it takes 24 weeks to process the claim, even if she discharges her responsibility with impressive speed, it seems impossible to avoid there being a break. That is what I am interested in. What are the Government going to do about that?
I think that I was trying to make the point, although I accept that I made it badly, that on the specific point that the noble Baroness has just raised I want to go back to the officials to get more detail, because this must have crossed their desks as a risk. If the noble Baroness will allow me, I shall write to confirm.
As I have said, the UK Government are working collaboratively with the Scottish Government to ensure that the two systems of social security will operate effectively alongside each other, and the required legislation that underpins them is delivered successfully for the people of Scotland and, where relevant, claimants in England, Wales and Northern Ireland. The order highlights the importance that the UK Government place on the effective functioning of devolution. I commend the order to the House.
Early Legal Advice Pilot Scheme Order 2022
Considered in Grand Committee
My Lords, I beg to move this statutory instrument, which establishes the early legal advice pilot scheme that will be conducted in Middlesbrough and Manchester for a time-limited period. The instrument amends part 1 of Schedule 1 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012, colloquially known as LASPO, to bring civil legal services for certain housing debt and welfare benefit matters in scope of legal aid for the purposes of the pilot scheme. It makes consequential amendments to secondary legislation for the purposes of that pilot scheme. The draft order is made using the powers conferred by LASPO itself.
The instrument lays the necessary foundations to put the pilot scheme into operation and signifies a crucial step in delivering a key commitment made in the Ministry of Justice’s legal support action plan, which we published in 2019. Through the pilot scheme, we will test the impact of early legal advice on the resolution of legal problems. We will also seek to quantify the benefits to individuals, their support networks, the Government and, ultimately, the taxpayer.
Civil legal aid is available to an individual if their issue is listed in Part 1 of Schedule 1 to LASPO. Legal aid may also be available on an exceptional basis where there would be a breach, or the risk of a breach, of the individual’s rights under the European Convention on Human Rights or any retained enforceable EU rights. This is known as exceptional case funding, or ECF.
Eligibility for legal aid, for both in-scope matters and ECF, is subject to a statutory means and merits assessment. The means test sets out that, if an individual’s capital or disposable income is above a certain threshold, they are generally not eligible for legal aid. There are different merits tests depending on the type of case but, generally, the merits test provides for a cost-benefit test and a “prospects of success” test. If those tests are not met, again, funding would not be granted. Under the current arrangements, legal aid for social welfare law matters such as debt, housing and welfare benefits is limited to the most urgent and important circumstances, for example if an individual is at risk of losing their home through eviction or repossession. This is so that legal aid is targeted at those who need it most.
However, during the post-implementation review of LASPO, we heard from respondents that the reforms in that Act, which came into effect in 2013, might have caused increased financial costs to individuals, their support networks and the Government. Those respondents explained that individuals experiencing social welfare legal problems, especially related to housing, were now unable to resolve their problems at an early opportunity. This meant that they were now likely to experience problem-clustering and problem escalation, each of which can lead to costly intervention. Frequently cited examples included increased use of court services for possession proceedings; greater reliance on welfare benefit and on temporary and permanent accommodation services; and increased use of health services for stress and anxiety.
Although we have some anecdotal evidence to support the view that early legal advice could produce benefits to individuals and to local and central government, there is limited empirical evidence. In particular, there is limited evidence in relation to the financial impact of early intervention through the legal aid scheme. I am sure we can all agree that the argument that early intervention can result in cost savings feels intuitively correct. However, in order to make robust arguments for funding for early legal advice and ensure that we provide value for money for the taxpayers who will fund it, we need an argument based on actual evidence. We are therefore bringing these matters into scope and using the pilot scheme as an opportunity to gather robust, quantitative evidence that can demonstrate whether early legal advice can lead to early problem resolution, thus bringing savings to the public purse.
The pilot will be in two specific areas—Manchester and Middlesbrough—and will be time limited, from 1 April 2022 to 31 March 2024. Individuals will be eligible if they live, or habitually reside, in the area of Manchester City Council or Middlesbrough City Council. They must be selected to participate by a person appointed by the Lord Chancellor, who will publish guidance explaining who the person will be—they might be an independent evaluator—and how they must select participants. Participants will receive a maximum of three hours of advice and assistance for housing, debt and welfare benefit matters.
We have worked closely with legal aid providers and other government departments to devise the pilot scheme and finalise the terms of this amendment. The amendment to Part 1 of Schedule 1 to LASPO in this instrument brings these matters into scope for legal aid, subject to some exclusions outlined in the order; for example, participants cannot receive advocacy or representation services. This reflects the intentions of the pilot because it is all about advice before court proceedings are initiated.
It covers, therefore, civil legal services relating to advice and assistance in relation to housing, debt and welfare benefits for a maximum of three hours. Participants can receive advice and assistance irrespective of whether their matters fall into one or all of those categories. They will receive holistic advice on all those categories as far as needed. The maximum time for advice is fixed at three hours, but there is no means or merits test. The only criteria are the geographical requirements and that they are included in the pilot scheme by the person appointed by the Lord Chancellor.
I should also point out to the Committee that there are some technical amendments to other instruments. It amends the regulations on financial resources, merits criteria and remuneration. The financial resources and merits criteria regulations set out the means and merits tests, and they are amended, as I explained, to enable participants to meet the means and merits tests. The amendments to the remuneration regulations introduce a new fee for the legal providers undertaking work as part of the scheme. They will be asked to provide information and data for the purposes of assessing the pilot in addition to the information they normally provide to the legal aid scheme, as any legal provider would do. Because they are being asked to do more, we will pay them an extra 25% uplift to reflect that extra burden of providing information for the pilot.
The essential point is that this will enable us, we hope, to have an evidence base to allow us to determine whether a service as set out in the pilot would provide meaningful benefit to individuals and local and central government. We think this is the best way to proceed so we can obtain that evidence, and I commend the instrument to the Committee.
An evidence base? The clue to these proceedings was in the Minister saying that they are looking for savings to the public purse. I think the Treasury is definitely behind this.
When I was a humble solicitor in the 1960s, I used to fill in a green form for people to give them advice. In 1973, a simple green form scheme was introduced and in 1994 the noble and learned Lord, Lord Mackay of Clashfern, then Lord Chancellor, described it as
“an important means of access to legal advice for people on low incomes. In 1993/94, over 1,600,000 people received help from the … scheme.”—[Official Report, 3/11/1994; col. WA 73.]
I fail to see why we now need a highly expensive two-year study to find out whether there is a need for such advice. It is obvious. It was in 2013 that the coalition Government, I am afraid, reformed the scope of civil legal aid in the LASPO Act, including, as the memorandum tells us,
“the removal of funding for early legal advice and support for most social welfare law.”
Some reform that was.
As for research, the Explanatory Memorandum states in paragraph 7.3:
“While research by organisations such as Citizens Advice, Shelter, the Law Society and the Equality and Human Rights Commission was persuasive in suggesting a link between early legal advice and downstream benefits, officials in the department concluded that their findings did not robustly quantify the financial savings for government, nor did they account for the costs of individuals whose problems would not be resolved with early legal advice”.
So there has been considerable research by NGOs, all pointing the same way.
The Government produced their review in 2019, and it has been knocking about for three years before anything was done under it. There will now be a two-year pilot scheme, very limited to 1,600 individuals in Manchester and Middlesbrough. Some five years will elapse from the review that the Government themselves carried out.
The Government describe the pilot scheme in this way:
“the Ministry of Justice is commissioning a process, impact, and value for money evaluation to support the effective delivery of the project, and the generation of robust impact evidence. An initial phase ahead of pilot delivery will be an in-depth feasibility study to fully assess and recommend a robust, practical research pilot and evaluation design”.
“the gold-standard approach to assessing impact, highly novel in the Access to Justice policy area.”
These very helpful answers were provided to the Secondary Legislation Scrutiny Committee, whose questioning of the Ministry of Justice was admirable and full and produced a lot of information that I need not go into. But there we are: gold-plated research, which means that people whose needs were seen in 2019 will have a five-year wait before anything happens, and we do not even know whether it will happen then because it will depend on the evaluation of the gold-plated people of the project.
We currently face a great rise in deprivation that will happen to people in this country. The situation as we know it is dire and will get worse, with price rises and additional taxes. Now is the time for the people in this category—the people I used to advise in those far-off days when we did not live in a very rich area—to be given support, not in 2024 and thereafter. This is a disgrace.
My Lords, the noble Lord, Lord Thomas, has given us an historical context for what we are receiving through this statutory instrument. We of course support it, because it goes some way to ameliorating the position we have had since the massive cuts in 2013 with LASPO. The noble Lord has made the broader points, with which I agree.
I want to focus on two particular questions, one of which was asked by my honourable friend Afzal Khan when this matter was debated in the House of Commons. He contacted the Greater Manchester Law Centre and the Law Society there, the only two welfare benefit and legal aid providers in Manchester city and the only two debt legal aid providers in Middlesbrough, one of which also advises on welfare benefit law. He made the point in the House of Commons that the scheme will undoubtedly create an increase in demand. There was scepticism, from that limited number of providers, whether the three-hour limit is enough in itself and whether the pay is enough for those three hours. How, given that there is very likely to be an increase in demand, will the ministry respond?
The Minister used a couple of phrases that I thought were appropriate when he talked about the problem of the clustering of cases around a multitude of different contexts—housing, welfare and the like—and about the problem of escalation. From different parts of our working lives outside this House, we all know that both of those things are right and true, both in the housing context and the criminal justice context as a whole—something I know from my work in magistrates’ courts.
The Minister said that there was limited evidence of financial benefit from early intervention. The noble Lord, Lord Thomas, expressed extreme scepticism, and I agree with him: there is a multitude of reports about the benefits of early intervention, and I have lost track of the number of early-intervention pilots that I have seen on the criminal justice side that have fallen by the wayside for various reasons.
I will raise another question, which comes from the Secondary Legislation Scrutiny Committee report’s appendix 2:
“Further information from the Ministry of Justice on the draft Early Legal Advice Pilot Scheme Order 2022”.
Question 1c is as follows:
“The wording of the SI indicates that those who are selected but receive no advice will also be informed that they are part of the pilot—will that control group also be required to fill in any evaluation or description of their experience? Otherwise, they will be just like any other Housing benefit claimant—what marks them out?”
That is to say, what marks them out as different in the data collected? The answer is:
“The pilot is seeking to develop robust quantitative impact evidence, and so how to best collect control or comparison group evidence is a priority issue to be examined. The specific criteria and process for identifying and engaging the control or comparison group is to be determined based on feasibility work to be undertaken by the independent evaluator.”
I did not read that out very well, but I understand what it means. My experience on the family court side is that a large number of people drop out of the system. Advice is made available and people start accessing it, but then the process becomes difficult and tiresome and people just stop engaging.
So, arising out of that question and answer, my question to the Minister is: will there be an evaluation of people who start the process but do not finish it? That is part of the overall cost, and it is also a demonstration of the impact or otherwise of these schemes. As I say, from my experience in a different context—family law—a very big part of the overall picture is the people who do not pursue the advice and support that are available to them because doing so is just too burdensome.
My Lords, I am very grateful for the contributions from the noble Lords, Lord Thomas of Gresford and Lord Ponsonby of Shulbrede. I will pick up a few points in response. On the Treasury being behind it, I say that this is not a Treasury-driven measure, in the sense that the sole focus is not the public purse. But we have to recognise that the Treasury is ultimately behind the legal aid system: it is funded by the public purse, and we have to make sure that we get value for money.
One of the things that we are doing here is trying to answer this question—we all feel this instinctively, perhaps, and, as the noble Lord, Lord Thomas, said, there are lots of people in the market, so to speak, who say, “Spend some money now; you’ll save more money later on”. But we want to have some robust evidence to see to what extent that is actually the case—and also to see to which particular groups it applies more and to which it applies less. We have a very diverse population, and one of the things that we will be able to do in the pilot is look at people with different backgrounds and needs and see the extent to which the early legal advice actually helps. Although I am well aware of the research by the various NGOs that the noble Lord mentioned, that is not empirical evidence. We do not have the robust, quantitative evidence that we will get from the pilot.
I will pick up the points made the noble Lord, Lord Ponsonby, who asked a few questions around time limits and associated points. First, on the appropriateness of the fee, I explained the 25% uplift. To obtain the figure for the underlying fee, we used the existing non-London hourly rates for housing and family matters; that generated the baseline fee for the work. We added the 25% uplift to increase the extra costs. We are confident that that will mean that we get proper take-up from providers.
As to why the allocation is three hours and not, for example, two and a half hours or four hours, I will make two points. First, at the moment, little information is available about the average time that providers would spend with somebody requiring advice of this nature. As part of the pilot, we will ask providers to record the time that they spend. We will also ask them whether they spend that time during one appointment or over a series of appointments, because some people might come and say, “This is my problem”, and the provider might say, “Ah, I can help you on that, but I need to see a particular document that you haven’t brought with you. So please make another appointment and come back”. So they might have an initial half-hour, for example, and then another two and a half hours later. The pilot will enable us to gather that evidence. To make this administratively simple, the way we are doing this is that, even if the provider spends only two and a half hours, there is a flat fee for three hours with the 25% uplift. There may be a bit of rough with the smooth, so to speak, in that we have sought to make it simple because we want providers to engage and we want proper take-up.
On the other point made by the noble Lord—I say respectfully that it was a very good point—we will follow up on the experience of people who are part of the scheme. Specifically on dropouts, it may be a bit more difficult, but we will attempt to follow up on the experience of people who dropped out and ask them why they dropped out. Was it because they did not like the provider, for example? Was it because they thought their issue was a housing issue but it turned out that it was a different issue? We are focused on that; it is an important point.
I hope I have responded to the main points that were made. I am grateful for the broad support for the instrument, even if it is on the basis that heaven rejoices over all sinners who repent. At least there was broad agreement on the principles underlying the pilot; I therefore commend the instrument to the Committee.
My Lords, the Committee will adjourn for a few moments until the people involved in the next business are in place.
Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2022
Considered in Grand Committee
My Lords, I beg to move that the regulations be considered.
Slots are a means of managing scarce capacity at the busiest airports. Ordinarily, airlines must operate slots 80% of the time to retain rights to them the following year. This is known as the 80:20 rule or the “use it or lose it” rule. In normal times, this rule helps ensure capacity is used efficiently and prevents airlines from hoarding valuable slots without using them.
The Committee will be aware that Covid-19 has caused exceptional challenges for the travel industry. One way in which the Government have supported the sector over the past four seasons has been with generous alleviation of these rules. On 11 February this year, we lifted most remaining travel restrictions, which means that people can now travel abroad and visitors can come to the UK more easily, whether for a holiday, for work or to visit loved ones. We have reopened the country, and our slot alleviation plans for the summer season are designed to support this process.
This package was developed following consultation with industry. We received 48 responses from air carriers, airports and industry bodies, which supported a wide range of different measures. Views ranged from calls for a full waiver to support for full reinstatement of the 80:20 rule, with most responses somewhere in between. We have carefully considered these views, alongside the available data, to develop this package of measures.
I shall give some brief background to this. When the pandemic initially struck, the 80:20 rule was fully waived to avoid expensive and environmentally damaging flights with few or even no passengers on board. Following the UK’s departure from the EU, the UK Government chose to extend the European Commission’s waiver of the 80:20 rule to cover the summer 2021 season, which lasted until 30 October 2021, through the Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2021. Taking the opportunity of our departure from the European Union, we then used the Air Traffic Management and Unmanned Aircraft Act 2021,or ATMUA, to create a more flexible set of powers that could adapt to the specific circumstances of the sector. That legislation was recognised as an essential tool to help to manage the impacts of the pandemic, and received cross-party support.
For the winter 2021 season, we used these powers for the first time. As recovery remained uncertain, our focus was on supporting the sector. Our measures were generous and exceeded the alleviation package provided by the EU. By allowing airlines to hand back full series of slots, we gave them certainty that they could retain their slots, even if not operated, which helped to mitigate some of the commercial impacts of the pandemic. This is because otherwise airlines might have chosen to incur the cost of operating near-empty flights merely to retain slots. This also reduced the likelihood of needless emissions from near-empty aircraft. We are proud that, thanks to these measures, we are not aware of any flights that have taken place solely to retain an airline’s slots.
As required by the ATMUA Act, we have determined that there is a continued reduction in demand, which is likely to persist. We consider that further alleviation measures are justified for the summer 2022 season, which runs from the 27 March to 29 October 2022. On 24 January, we therefore published this statutory instrument, setting out the package of alleviation measures that we propose to put in place for this coming summer. The draft instrument applies to England, Scotland and Wales. Aerodromes are a devolved matter in relation to Northern Ireland and, as there are currently no slot co-ordinated airports in Northern Ireland, the Northern Ireland Executive agreed that it was not necessary for the powers in the Act to extend to, or apply in relation to, Northern Ireland.
In the draft instrument we are considering, our measures aim to encourage recovery, while protecting carriers where severe international travel restrictions remain. This includes changing the minimum usage ratio to 70:30. This means that airlines are required to use their slots at least 70% of the time to retain the right to operate them the following year. This is lower than the 80% in normal times but higher than the 50% ratio adopted for the winter season, thereby reflecting progress towards recovery.
The draft regulations include stronger provisions to avoid low-volume flying, by expanding the reasons which airlines may use to justify not using slots to include existing Covid-19-related restrictions. This will apply where measures, including flight bans and quarantine or self-isolation requirements, are applied at either end of a route and have a severe impact on demand for the route or on the viability of the route. Unlike during the winter season, this will also apply when restrictions could reasonably have been foreseen, so as to protect carriers in markets with long-term restrictions in place. There will be a three-week recovery period during which the provisions may still apply following the end of the Covid restrictions.
In addition, we will allow earlier applications for justified non-utilisation of slots. By this I mean that, where there is an official government announcement, either domestic or overseas, about the duration of the Covid restrictions, at that point the carrier will be able to ask the slot co-ordinator for justified non-use to cover the whole period. This can be done in advance and will mean that the carrier will not have to reapply every three weeks, as at present. This will allow earlier hand-back of slots, so that other carriers will have an opportunity to use them, and it will remove some of the administrative burden on airlines.
In the winter 2021 season we made provision for “full-series hand-back”—in other words, allowing an airline to retain rights to a series of slots for the following year if it returned the complete series to the slot co-ordinator for reallocation prior to the season’s start. We have decided not to continue full-series hand-back this season. It was a generous measure that reflected the uncertainty around the winter season.
Given the success of the vaccine rollout, the relaxation of travel restrictions and the more positive demand outlook for the coming summer, I believe that it is now time to move towards a normal usage ratio, but with a strengthened justified non-utilisation provision to provide protection in case of severe restrictions or the emergence of new variants of concern. These measures will cover the summer 2022 scheduling period. and we are currently considering alleviation for winter 2022. I reassure the Committee that we will consult on this later in the year.
I will say a final word about so-called “ghost flights”. Carriers in restricted markets will still be protected by our justified non-utilisation provision. For open markets, the decision to operate flights is ultimately a commercial one for airlines, but carriers will be subject to a lower than normal usage ratio of 70%. The alternative of providing unlimited relief would allow incumbent airlines to retain unused slots at airports while preventing other carriers from using them, restricting competition and ultimately harming consumers.
Through this package of measures, we aim to strike a balance between supporting the sector and encouraging recovery and the efficient use of slots. The regulations that we are considering today make use of time-limited powers designed specifically to respond to the impact of Covid. However, the Government are focused on supporting the industry not just in the short term. As the UK’s aviation sector grows, we will review the slot allocation process as a whole to ensure that it is well equipped to encourage competition, consumer choice and efficiency. I commend the instrument to the Committee.
My Lords, I thank my noble friend the Minister for his comprehensive update on the adjustment from 80:20 to 70:30. It is a reasonable and practical way forward. Could he also take into account that, although there are fewer long-haul flights to east Asia due to the impact of Covid, the closure of Russian and Siberian airspace will also have serious long-term repercussions, as the traffic from the UK naturally increases for our long-haul carriers?
Although a side issue, the knock-on effects of these airspace closures on the reduced frequency of operations will include increased fuel burn, which in turn will affect ticket prices on what are normally extremely lucrative routes. As of Sunday, carriers such as China Eastern, Air China, Cathay Pacific, Korean Air and some others with bilateral air service agreements with the UK were still flying over Russian and Siberian airspace to the UK. Some of those countries actually abstained in the vote on the invasion of Ukraine at the Security Council meeting, and will no doubt continue to fly when possible. That brings in a competition issue. I would be grateful if the Minister could take on board these points for further consideration.
My Lords, I welcome this SI and thank the Minister for his explanation. It provides stability for the aviation sector and, importantly, removes much of the incentive for airlines to operate environmentally damaging ghost flights or flights with very few passengers just to keep their slots.
The Secondary Legislation Scrutiny Committee questioned the Government’s decision to opt for 70%, which was the preferred option of airports, over 60%, the preferred option of airlines. This is a finely balanced decision based on data that is not available to me but which I hope the Government have analysed. I tend to side with the airports and hence endorse the Government’s decision, because airports have a much less flexible business model than airlines. You cannot just park up an airport; you have to keep it functioning, for certain safety reasons, even if you no longer have any commercial income.
I also welcome the Government’s additional reasons for non-utilisation of slots. The Explanatory Memorandum refers in paragraph 12.2 to what I call the game of slots played by certain airlines. It explains how attempts to consolidate valuable Heathrow slots have an impact way down the line on smaller airports—and, it is worth pointing out, on the availability and choice of flights and their price for passengers. This emphasises to me that the airlines have the upper hand here. That is another reason to endorse the Government’s decision.
However, I have one important question for the Minister, which echoes the points made by the noble Baroness, Lady Foster, with whom I fully agree. All these decisions were made prior to the recent awful war in Ukraine and its impact on many long-distance routes. There is likely to be a deterrent effect on travel to eastern Europe, which is generally regarded as being potentially affected by political instability. A vast range of frequent short-distance flights for leisure travel, as well as for business travel, to eastern Europe may be affected by this.
The noble Baroness pointed out an important loophole in the rules on overflying Russia and accepting flights in this country that have in practice flown over Russia. It is important that the Government clarify their position and amend their decisions in that regard. Can the Minister tell us what discussions the Government have had with the aviation industry about the impact of the war in Ukraine on it and what trends are emerging from what they can see so far? This is already being described as a second major challenge to our assumption that we can rely on easy international travel.
We are in agreement with the statutory instrument so I do not intend to speak at any great length. However, I have one or two questions and queries, which may display the fact that I have not fully understood the SI rather than anything else.
The reality is, as the Minister said, that we have slots because of lack of runway capacity and, indeed, airports. Presumably, if we had sufficient runway capacity and airports, we would not need slots. Do the Government accept that that is the case? If so, is that issue of runway capacity and airports, or lack of runway capacity and airports, one that the Government intend to address, since it appears that slots are related to that situation?
There is also a reference in paragraph 6.1 of the Explanatory Memorandum to the
“allocation of slots to air carriers at congested airports”.
I almost certainly ought to know the answer to this but I cannot think of it offhand. Which UK airports are deemed congested and therefore have the slots? Is it just the obvious ones that we can probably think of, or is it rather more extensive?
I believe the Minister said in his comments that, as a result of the measures that had been taken, the Government were not aware of any flights that had taken place just to retain the slot—that is, ghost flights. I may not have understood correctly what the Minister said but, if I did, how have the Government got this information and how would they define a flight that has taken place just to retain slots? As I understand it, during the waiver period, there were a substantial number of flights at very low capacity. I know that there may be an argument that they were carrying cargo, or they may have been repatriation flights, but does that mean that the Government really have kept tabs on all those flights and have satisfied themselves that none of them was flying purely to retain a slot? Admittedly, with a waiver rule, one wonders why they would have been doing that in any case, but it would be helpful if the Minister could comment on what I believe he said about the Government not being aware of any flights just to retain the slot.
Before the pandemic, can I take it that we were in a situation whereby no flights took place just to retain slots? In other words, in the summer of 2019, how many empty or near-empty ghost flights were operated? Perhaps the answer is none at all, in order to retain an airline’s historic rights to its slots. Is it anticipated that, with the 70:30 ratio, on which there has been a lot of consultation, as the Minister said, there will be no need for any airlines to start to operate ghost flights to retain that ratio? Is that how the figure has been determined as the appropriate one for this summer?
Finally, I come back to a point to which the noble Baroness, Lady Randerson, referred, on the response of the airlines. As I understand it from the Explanatory Memorandum, there were rather more airlines in favour of the 60% usage ratio, and most airports preferred 70%. The Government have decided on 70%. I am certainly in no position to say that they have got that wrong, but the noble Baroness referred to the data on which that assessment was made. I know that I am repeating a question she has already asked, but what data led the Government to decide that the 70:30 ratio was appropriate, bearing in mind that they apparently had airlines more likely to go for 60% and airports more likely to go for 70%? Was it a case for the Government of tossing a coin, or is there some hard data and evidence that led them to go down the road of 70%?
I start by thanking noble Lords for their consideration of these draft regulations. I appreciate the comments that have been made and the questions that have been asked. Before I respond, I shall say a few words about the challenges that our aviation industry has been tackling and take this opportunity to pay tribute to its efforts.
At the height of the pandemic, in April 2020, passenger numbers fell by 99% compared with the same month in 2019. Only 330,000 passengers passed through airport terminals. During the summer of 2020, passenger numbers increased as travel corridors were introduced but remained 80% below the equivalent 2019 levels. Following the introduction of the traffic light system on 17 May 2021, flight and passenger numbers rose at a steady pace between May and October 2021. In December 2021, 9.1 million passengers used UK airports but that was still 57% down on the same month in 2019.
I move on to answering the questions that were asked, if I can, in no particular order. I will start with the basic but important question asked by the noble Lord, Lord Rosser, about which UK airports we consider to be congested and which ones fall within the remit of these draft regulations. There are eight of them in the UK, including Heathrow, Gatwick, Birmingham, Bristol, London City, Stansted and Manchester. Of course, there are a lot of other airports around the UK, but they are not considered part of this.
The noble Lord, Lord Rosser, also asked about engagement; that ties in with some of the points made by the noble Baroness, Lady Randerson. I have a bit to say about this. In November and December, we held a targeted, four-week consultation in which we asked airports, airlines and industry bodies for their views on alleviation measures and invited supporting evidence. This takes account of the noble Lord’s point about the 70:30 or 80:20 split. We received 48 responses from 36 carriers, seven airports and five industry bodies, which we carefully considered alongside the available data. I say “the available data” but, as I said in my opening speech, we took account of them all and decided to take a middle line. As ever, in a consultation, you have to take account of all views.
On the impact of these measures, I want to go a little further in answering a question asked by the noble Baroness, Lady Randerson. The impacts were carefully considered—the noble Baroness mentioned the Secondary Legislation Scrutiny Committee, which is a fair point—as they were developed. We sought feedback and evidence from across the aviation sector and an impacts note was prepared to inform the advice to Ministers following the consultation. A formal impact assessment has not been prepared for this instrument because it makes provisions that are to have effect for a period of less than 12 months. That is my understanding of how the process works, which the noble Baroness may know more about than me.
I want to say some more about ghost flights in response to a question from the noble Lord, Lord Rosser. There have been reports, particularly in the press, of up to 15,000 ghost flights; I think that is what the noble Lord was alluding to. The figures reported in one newspaper—it happened to be the Guardian—covered departing flights from 32 airports between March 2020 and September 2021. During this period, there was full alleviation of the slot usage rules in place. One of the purposes of this was to prevent airlines needing to operate environmentally damaging ghost flights during the Covid-19 pandemic. We do not hold data on why flights may have taken place but, given the financial pressure that the Covid pandemic has put on the aviation sector, I know that airlines will not have wanted to operate flights unless they had to. As well as maintenance and training, we believe that many of these passenger flights will have been for reasons such as carrying cargo, as the noble Lord alluded to, or returning UK citizens home when Covid restrictions were introduced or changed at short notice. I am not sure that the data one can get is an exact science but I hope that that goes some way to offering a response; it is certainly as far as I can go.
My noble friend Lady Foster and the noble Baroness, Lady Randerson, raised some very important and highly topical points about Russia and Russian airspace. It is too early to give a full answer on what we are doing, but I will give an overview of the aviation sanctions we have and explain the sanctions we have in place, which I hope will go part way towards being helpful. The Committee might know some of this.
UK Ministers have signed legislation bringing the existing ban on Russian aircraft under the sanctions legislation. This bans all aircraft that are Russian registered and owned, operated or chartered by persons connected with Russia or designated persons from entering UK airspace and landing in the UK effective from 5 pm on 8 March 2022. This legislation is part of an unprecedented package of sanctions that delivers the highest economic costs we have ever imposed on the Kremlin. This is a necessary act to hold the Russian Government to account for their actions in Ukraine, a sovereign democratic state.
These measures also include powers to detain Russian aircraft already at an airport and to direct them out of UK airports, as well as to ensure that anyone sanctioned by the UK can no longer register aircraft and will have any existing registrations terminated in the UK. Our actions are legitimate and proportionate as a response to Russian aggression towards Ukraine and its failure to comply with its wider international obligations. I hope the Committee would wholeheartedly agree with that.
To address the question raised by my noble friend on our aircraft flying into Asia and needing to avoid airspace, that is the gist of my point: it is too early to give a view on that, although it is quite clear that will have an effect on the length of flights and fuel consumption. It is something we will get back to the noble Baroness and the Committee on. She raises a very important point.
To go back to the regulations, overall, throughout this period, we have supported the industry not just through slot alleviation but since the start of the pandemic. We estimate that the air transport sector will have benefited from around £8 billion of government support. We have seen some new services start, both to European destinations and transatlantic. Since the international travel changes implemented on 11 February, the UK now has one of the most open and streamlined Covid-19 border regimes in the world. That is why we feel the time is right to focus on recovery and to allow the sector to move towards normal, notwithstanding what is going on in Ukraine.
To conclude, without this instrument there would be a return to the default 80:20 slot usage rule. Although the sector is recovering, we believe there is still a need for relief to reflect lower passenger demand to avoid empty or near-empty flights, as well as to support carriers serving severely restricted markets and to protect connectivity. I hope the Committee has found this informative.
Just before my noble friend’s final comments, can he address another point of concern that I made? Notwithstanding that some airlines such as those I outlined are still coming into the UK—China Airlines and so on, which are obviously using Russian airspace to come here—I emphasised that if that continues we will end up with predominantly a competition issue, apart from other issues, whereby we are building our traffic flying to east Asia but it has to go the long way round, which obviously adds cost, while the airlines I mentioned may continue to use Russian airspace, thereby using a shorter route and burning less fuel. It therefore becomes a competition issue. Will the Minister take that away, too, for his colleagues to look at?
I ask this more as a matter of interest than anything else. Was it the case in the summer of 2019—that is, before Covid—that the 80:20 ratio meant that there were no ghost flights and there was no need for them? Is it the Government’s view that with the 70:30 ratio in operation this summer there ought to be no need for ghost flights?
On the first point, yes, my understanding is that there were no ghost flights during the operation of the 80:20 rule. I wanted to make that clear but I will double-check and write to the noble Lord if I am wrong. I made that clear in my opening statement but just to be sure I will write to him. With the introduction of the 70:30 rule, the idea is that there should be no need for ghost flights. That has come about as a result of the consultation that has taken place.
Finally and briefly, when the noble Viscount looks at the issue that the noble Baroness, Lady Foster, raised, will he undertake to write to all of us who have taken part in this debate and set out an explanation of the Government’s view on the matter?
Indeed. I thank the noble Baroness for that point. Actually, I was saying to myself—this goes much wider than these draft regulations—that I imagine that an enormous amount of work is going on within the airline sector, the Government and particularly within the Department for Transport as regards discussing quickly and on a timely basis how to address these demanding issues. I undertake to write to the Committee on these matters.
Social Security (Scotland) Act 2018 (Disability Assistance and Information-Sharing) (Consequential Provision and Modifications) Order 2022
Considered in Grand Committee
My Lords, I beg to move that the draft order, which was laid on 31 January 2022, be approved. I am grateful for the opportunity to debate this order. It is the result of collaborative working between the two Governments in Scotland. The order is made under Section 104 of the Scotland Act 1998, which allows for necessary legislative amendments in consequence of an Act of the Scottish Parliament. Scotland Act orders are a demonstration of devolution in action and I am pleased to say that, although this is my first order, my office has taken through more than 250 orders since devolution began.
The draft order amends various pieces of legislation in the United Kingdom as a consequence of the Social Security (Scotland) Act 2018, which I shall refer to as the “2018 Act”, and regulations made under the 2018 Act. This order has been brought forward as a result of the close co-operation between the UK and Scottish Governments. Through the 2018 Act, the Scottish Government can introduce new forms of disability assistance using the social security powers devolved under Section 22 of the Scotland Act 2016.
Section 31 of the 2018 Act allows the Scottish Government to introduce a payment to provide financial assistance for disabled people in Scotland, called disability assistance. Disability assistance will replace three existing benefits currently delivered by the Department for Work and Pensions: disability living allowance, personal independence payment and attendance allowance. Through these powers the Scottish Government have legislated that adult disability payment will replace personal independence payment, beginning with a pilot on 21 March 2022.
From introduction, adult disability payment will operate in broadly the same way for broadly similar people as personal independence payment. Applications will be accepted from individuals between 16 years old and state pension age. It is the UK and Scottish Governments’ intention that there will be equitable treatment for those individuals receiving personal independence payment and adult disability payment. If this order is passed, it will ensure the equitable treatment of individuals in receipt of adult disability payment and personal independence payment with regard to tax treatments, benefits, entitlements and voting rights.
I will next outline the details of what the order does to ensure that people receiving adult disability payment receive equitable treatment with those on personal independence payment. In terms of changes to taxation legislation, the order will extend the definition of a disabled person to include individuals in receipt of a qualifying rate and component of adult disability payment. This will apply in two cases: first, where the tax treatment of property is held in a trust for the benefit of a disabled person; and, secondly, to the early withdrawal of funds from a child trust fund or junior ISA if the young person is terminally ill.
The order also extends provision to ensure that those on adult disability payment benefit from the following reliefs: a VAT zero rate for the leasing of vehicles to individuals under the Motability scheme; a VAT zero rate for the onward sale of vehicles previously let under the scheme; an exemption from insurance premium tax on the insurance covering vehicles leased under the Motability scheme; eligibility for a driving licence at age 16 rather than 17 when the individual has an award of the enhanced rate of the mobility component of adult disability payment; and an exemption or a 50% reduction in vehicle excise duty if the individual receives either the enhanced rate or the standard rate of the mobility component respectively. The order will also allow the DVLA to request data from Scottish Ministers to confirm whether an individual is eligible for a driving licence at age 16 or eligible for reliefs in vehicle excise duty.
The order also ensures that adult disability payment can act as a qualifying benefit for the annual Christmas bonus, carer’s credit and carer’s allowance in England and Wales. The latter will ensure continued entitlement to the reserved carer’s allowance in the small number of instances where someone in England and Wales is caring for an individual in Scotland. The order also makes changes to election legislation to entitle those receiving the enhanced rate of the mobility component of adult disability payment to a proxy vote at UK parliamentary and local elections. It also allows for this group to provide a proxy signature for a recall petition without attestation of the application.
Lastly, corresponding provisions for entitlement to carer’s allowance and carer’s credit have been included for Northern Ireland. This will ensure that a carer can apply for support in relation to an individual who has moved from Scotland to Northern Ireland while remaining in receipt of adult disability payment for the 13-week run, affording the individual time to apply and be assessed for personal independence payment.
As I highlighted earlier, all these changes simply ensure that the system for disabled people who are receiving adult disability payment operates in an equitable way, as for a disabled person receiving personal independence payment. These changes are not within the competence of the Scottish Parliament, and the UK Government are therefore facilitating them through this order. This ensures that people in Scotland are not disadvantaged by devolution, meeting the principles set out in the Smith commission.
Finally, the UK and Scottish Governments have worked closely together to ensure that the two systems of social security operate effectively alongside each other, and that the required legislation that underpins them is delivered successfully for the people of Scotland. This order highlights the importance that the UK Government place on the effective functioning of devolution and the strength of the union.
My Lords, I thank the Minister for that introduction, and indeed welcome him to the special joys of secondary legislation consideration in the House of Lords. I wish him many more in the future.
We support this order and are pleased to see the Scottish Government using the powers transferred to them under the 2016 Act and subsequent legislation—although I briefly venture that we might wish that they had been a little speedier in so doing. However, to say that is to grumble. As we have heard, the Scottish Government are introducing disability assistance for disabled people, and this new adult disability payment has been created to replace DLA, PIP and attendance allowance, starting with a pilot on 21 March. Indeed, a little earlier in Grand Committee, we were debating an order relating to how the ADP will interact with benefits in the rest of the UK. I will not go back over the other questions, but, as the Minister indicated, the order also extends exemptions in relation to mobility, vehicle exemption, access to early driving licences and the definition of a “disabled person” in some tax and benefit legislation.
I have a couple of questions. The Minister said:
“At its introduction, adult disability payment will operate in broadly the same way and for broadly the same group of people as personal independence payment.”—[Official Report, Commons, Delegated Legislation Committee, 2/3/22; col. 3.]
I take that to mean that the conditions for eligibility for ADP will be the same as for PIP, at least at introduction. Does the Minister know whether it is intended that the benefits will continue to be in alignment, or might they diverge over time? Does he know whether there will be a similar, or indeed the same, assessment process for accessing ADP as for accessing PIP? That could make a difference if someone was in receipt of one benefit and moved to the other jurisdiction.
What discussions have the UK Government had with the Scottish Government about how this transition will work? When this order was debated in the Delegated Legislation Committee in the other place, the Minister, Iain Stewart, said:
“The 13 weeks is a safety net, and applications can be made in advance. It is there to ensure that payments can continue if there is some delay, so that no one is disadvantaged.”—[Official Report, Commons, Delegated Legislation Committee, 2/3/22; col. 8.]
I took that to mean that an application for PIP could made while someone was still living in Scotland—in other words, in advance—in order to avoid any gap in payments. But I raised this with the DWP Minister in relation to the earlier DWP order, and, although I have not had the chance to read Hansard, I got the impression that this was not the case: someone would have to wait until they moved to England to make that application. But, if the Minister knows, I would be grateful to understand that—I may not have heard it correctly.
Either way, the intention of the run-on is clearly to ensure that there is no gap in payment for someone moving from Scotland to England. But is the Minister aware that the latest official statistics show that it takes 24 weeks for a claim for PIP to be processed? So, if there is a 13-week run-on and a 24-week application process, I wonder whether there have been discussions between the two Governments about how to manage that. Again, I raised this with DWP, but it is a matter for both departments to consider.
Could the Minister tell us what discussions have happened between the UK and Scottish Governments to ensure that disabled people in different parts of the UK are informed of the consequences of a move to or from Scotland? What support will be put in place to ensure a seamless transition from previous benefits to the new regime administered in Scotland? Ministers have said that the intention is that there will be a run-on going the other way as well, but we do not know when yet—so obviously that is an issue in the short term.
Finally, I have one brief question. There will need to be effective interaction between these new Scottish systems and the existing UK infrastructure, including in respect of DVLA as well as DWP. So how do we ensure that both those systems work well and that people who are getting benefits are aware of possibly different timescales and application mechanisms—and, as a result, know what to do? These benefits go to some of the most vulnerable people in our society, and it is very important that they work well. I look forward to the Minister’s reply.
I thank the noble Baroness, Lady Sherlock, for her comments. It is indeed interesting that the first instrument on this afternoon’s Order Paper covered the same piece of legislation from the other end; we are joined up in that respect. The question here is broadly about the same way and the same people. The principles are very much that the two Governments work in lock-step; that the treatment of individuals in the UK should be the same, whichever jurisdiction they happen to be in; and that, at the current moment in time, there is absolutely equal treatment in terms of qualification and payments between the two countries.
However, as part of the Scotland Act and the Smith commission, a transfer is ongoing. This is in fact the 12th such benefit to be moved north of the border. Effectively, it allows the Scottish Government not only to become the payer but to have the machinery to make payments through Social Security Scotland. The customer should see absolutely no difference in this transition but, going forward, we have pilots starting in Perth and Kinross, Dundee and the Western Isles. Initially, new claimants will come on to the new system. The idea is that, from the summer onwards, 300,000 people will be transferred across from the English system to the Scottish system. However, it is absolutely not our place to debate in this place how that will go forward. When we transfer those powers, we do so on an equal basis; it will then be for the Scottish Government to decide how they will legislate for their programme of government. We cannot comment at this point as to whether there will be divergence; that will be a matter for the Scottish Government.
As far as the 13-week timeframe is concerned, that is considered reasonable. I heard the point made in the first debate about 24 weeks, which seems rather long. I know that the Minister in that regard will write; the question of what will happen if there is a gap is one that we will probably come back to. The objective here is to have no gap, so that, as claimants move from one region to the other, they can apply and be assessed within 13 weeks, and continue—and, indeed, be backdated as well. The spirit of this legislation is that there should be no gap, but the specific question about 24 weeks needs to be looked at, so I will combine with the Minister from the first debate, my noble friend Lady Stedman-Scott, on that one.
Crucially, the notification of customers is dependent on what we now call customer care. It should be done with the customers. The DWP must write to customers who are transferring, and anyone coming south of the border again must be notified by Social Security Scotland. One has to assume that the agencies involved will do that and take care of the process. At the end of the day, the DWP and Social Security Scotland will co-operate closely. Their objective will be to ensure that there is no detriment to disabled people as a result of the introduction of the adult disability payment.
I conclude by saying that this instrument demonstrates the continued commitment of the UK Government to work with the Scottish Government to deliver for Scotland and maintain a functioning settlement for Scotland.
Flood Reinsurance (Amendment) Regulations 2022
Considered in Grand Committee
My Lords, the instrument before us was laid before the House on 27 January. It makes important changes to the Flood Re scheme, a joint government and industry scheme launched in 2016 designed to improve the availability and affordability of UK household flood insurance.
In 2019, the scheme administrator, Flood Re, published its first quinquennial review. This is a statutory requirement. Flood Re made several recommendations to the Government. A number of proposals have since been assessed and consulted on, leading to the changes set out in this instrument.
To date, Flood Re has helped more than 350,000 households at high risk of flooding across the UK to access affordable insurance. Before Flood Re, just 9% of policyholders with a prior flood claim could obtain flood insurance quotes from two or more insurers, and none could get quotes from five or more. Following the scheme’s launch in 2016, the availability of flood insurance policies for those with prior flood claims has increased. Around 96% of customers can now get five or more quotes, and four out of five householders with a prior flood claim have seen price reductions of more than 50% since the scheme’s launch.
Building on this success, the statutory instrument makes technical changes to the scheme to improve its efficiency and effectiveness and changes to drive the uptake of property flood resilience measures, helping the UK to become more resilient to the changing climate. I will outline these measures in turn.
The statutory instrument designates a revised scheme, as described in the new scheme document dated 19 January 2022. The scheme document provides the framework for Flood Re to administer the scheme. First, the new scheme document will allow Flood Re to propose a revision to levy 1 every three years instead of every five, and reflects the Government’s assurance process. Levy 1 is the scheme’s primary income, raised from UK household insurers based on their market share. The revised levy amount will be subject to parliamentary approval every three years. This change will allow Flood Re to obtain better value for money when purchasing reinsurance and be more dynamic in response to the potentially changing risk profile. The instrument amends the figure for levy 1 from £180 million to £135 million per year for the next three years. This will ensure that the total levy is no higher than it needs to be.
Secondly, the new scheme document will allow Flood Re to set the liability limit— this sets the maximum amount of claims that Flood Re is liable to pay to insurers in any one financial year—every three years instead of every five. This will align it with the levy-setting cycle and afford Flood Re greater flexibility to respond to the scheme’s changing income needs and risk profile.
Thirdly, the new scheme document also makes a technical clarification that levy 1 funds will be returned to the Government when the scheme ends, in line with the established agreement between the Government and Flood Re.
I now turn to the change that will help drive the uptake of property flood resilience in UK households. We have seen only recently the devastation that can be caused by flooding and the impact on the lives and health of those households that are affected. Property flood resilience gives homes and businesses the tools to manage the impact that flooding has on their property and their lives, enabling them to respond and recover more quickly if flooding happens.
The new scheme document will allow Flood Re to pay claims from insurers ceding to the scheme, which include an amount of resilient repair up to a value of £10,000 above the cost of like-for-like reinstatement of actual flood damage. This will allow UK householders to build back better after a flood, making their homes more resilient to possible future flooding by using products such as air brick covers, flood doors, water-resistant kitchens and plasterboard. Resilient repair will enable homeowners to return to their homes quicker and reduce the cost of any future claims.
Build back better is being introduced on a voluntary basis. Insurance companies who cede to the scheme can choose whether to offer build back better to their customers. Participating insurers will be able to start offering build back better soon after the regulations come into force. Flood Re, the scheme administrator, will require insurers choosing to participate in build back better to offer it across their home insurance offerings rather than just on insurance policies ceded to Flood Re, thus ensuring consistency and fairness for all customers.
By providing Flood Re with the power to pay claims to fund resilient repair over and above normal reinstatement, the Government and Flood Re aim to drive a cultural shift across the insurance market, driving positive changes in supply chains, raising awareness and demand for property flood resilience, and helping to capture the evidence on the benefits of property flood resilience to support future changes in the market.
The Government will publish a property flood resilience road map at the end of this year, identifying the action that government and industry need to take to accelerate the take-up of property flood resilience measures and successfully underpin the market. This will ensure that all relevant bodies play their part and that consumers can have assurance about the quality of products and their installation. The road map will consider whether any changes to build back better are required to strengthen and improve it. Any future regulations brought forward making further changes to the Flood Re scheme would receive parliamentary scrutiny through the affirmative procedure, as required by the Water Act 2014.
Flood risk management policy is devolved. However, insurance policy, including the operation and application of the Flood Re scheme, is a reserved policy. Any changes to the scheme, including those in this instrument, take effect across the UK. The Government have engaged extensively with the devolved Administrations throughout the development of these changes; they support their implementation. No impact assessment has been prepared for this instrument because it has no significant impact on business, charities or voluntary bodies. Most impacts on business are anticipated to be either neutral or positive. There is also no impact on the public sector.
I commend these regulations to the Committee.
My Lords, I thank the Minister for his introduction to this statutory instrument, which seems fairly straightforward. However, I have a number of questions to ask him, if he is able to answer.
The Flood Re scheme was set up as part of the Water Bill in 2014 after the horrific flooding we witnessed during that winter. It was to ensure that, for those properties whose owners would find it almost impossible to gain flood insurance cover on the open market, the owners would not be left with no redress. The fund was to be paid for by a levy on all insurance companies, so spreading the load. The figure at that time was £180 million, as the Minister said; as a result of this statutory instrument, the figure is being reduced to £135 million.
The Adaptation Sub-Committee of the Climate Change Committee, chaired by the noble Baroness, Lady Brown of Cambridge, anticipates that flooding is likely to increase rather than decrease. In that case, how can the Government be sure that reducing the Flood Re fund by £45 million will not have a negative impact on those who cannot get insurance on the open market? Surely the fund should be monitored at the very least, or increase in anticipation of future demands on it.
The Explanatory Memorandum is clear that these regulations designate a new FR scheme. Given that the existing flood reinsurance scheme is working well, why is it necessary to have a new one? Apart from the difference in the sum involved, in what way will the new scheme be different from the existing FR scheme?
Paragraph 7.4 of the Explanatory Memorandum states that the liability limit will be reviewed
“every three years instead of every five.”
That is fine. The liability limit was £2.1 billion in 2016, with increases in line with the consumer prices index. Can the Minister say what the liability limit is currently, in 2022? It is important to review the limit but it has to be done in conjunction with the risk profile, as identified by climate change professionals, not just what Defra officials think might happen.
Paragraph 7.5 of the EM states that the surplus funds on the wind-up of the existing scheme will return to the Government. Can the Minister say why this surplus is not being transferred into the new scheme? This seems to me to be a mistake. If the insurance companies are paying a levy towards Flood Re, surely they should be the ones to reap the benefit of any surplus in the existing fund. Paragraph 12.3 refers to the lack of an impact assessment, as there is a negligible impact on businesses. If the surplus in the existing fund were transferred back to the insurers, it would have no impact at all on business. The Government are attempting to have their cake and eat it.
The new scheme will allow insurers on a voluntary basis to make payments of up to £10,000 for resilience repair—build back better—over and above the cost of like-for-like reinstatement of actual flood damage. My recollection is that this resilience repair element was part of the original commitment of Flood Re. Can the Minister say whether this was ever implemented from the start? If not, why not? Resilience is a vital element of this scheme.
I cannot see any reason why a new fund has to be set up if the existing one is operating well and has surplus funds in it. I am sorry to say that I feel something of a sleight of hand is going on here; at best, there is a distinct lack of transparency. Given the view of the Adaptation Sub-Committee of the Climate Change Committee that the incidence of flooding is likely to increase in future, I feel the reduction in the levy pot by £45 million is premature. Can the Minister reassure us that, for those who have access to the Flood Re fund, it will be there when they need it?
My Lords, I thank the Minister for his helpful introduction to this SI and the Secondary Legislation Scrutiny Committee for drawing it to our attention. I had a strong sense of déjà vu when reading it, as I was present when the first SI was debated back in 2015, which clearly illustrates that I have been in the job too long. I remember our original debates and will come back to some of the issues raised then.
Since then, the UK has suffered more regular and devastating extreme weather events, as the noble Baroness has said, with the result that thousands of properties are being flooded, many on a repeat basis. This has underlined the need for more robust and accessible home insurance. It is good to hear that Flood Re has been judged a success and that it has helped thousands of homeowners in flood risk areas who would otherwise have struggled to insure their homes, as the Minister was saying. It was also reassuring to hear that the scheme has met its initial liquidity and capital requirements and has a high solvency ratio, making it financially secure. On this basis, we accept that it makes sense to reduce the levy on insurance companies from £180 million to £135 million a year.
However, a number of questions arise from the proposals, which I would be grateful if the Minister could address. First, the Explanatory Memorandum referred to the statutory quinquennial review of the FR scheme and the recommendations that arose from it. Have all the recommendations of that review been agreed by government and put forward in this amended proposal today, or are there other recommendations still out there or under consideration or which have been rejected by the Government?
Secondly, as we have heard, one of the recommendations before us today is the build back better proposal to allow claims up to the value of £10,000 to enable homeowners to fund flood-resilient improvements over and above any like-for-like repairs. This is a welcome initiative, but paragraph 12.3 makes it clear that the participation of insurers in the build back better supplement will be voluntary. Why was it not made compulsory for all insurers to offer this payment, given the urgent need to make our properties more resilient to flood risk in future? Do we have any information about the appetite of insurers to pay this extra supplement? The Minister quoted some statistics, but I would be grateful if he could confirm what proportion of insurers are providing the build back better facility.
Thirdly, I return to some of the concerns raised when the original scheme was introduced which still seem relevant today. Are the poorest and most vulnerable—those in tenanted and rented properties—still excluded from the scheme? It really does not seem right that people living in the same or adjoining properties could have access to different standards of flood insurance purely on the basis of the status of those living in the property. Do you still have to be the homeowner to qualify? Since the scheme now appears to be financially secure, what consideration was given to extending access to it to wider categories of claimants, such as tenants?
Can the Minister clarify the current status of farmhouses? I know that this has been a concern for the farming community. Most people would say that they are primarily residential properties, even if they also act as a business address. Can farmhouses join the Flood Re scheme?
Finally, could the Minister clarify whether we are still focusing on properties deemed in high-risk flood areas? Given the recognised threat of extreme weather events arising from climate change—the noble Baroness talked about the issues raised by the Adaptation Sub-Committee on this—how can we be sure that the right areas are now being designated as high-risk flood areas? Has not our experience of flood risk in recent years been that it is increasingly hard to define? Does the Environment Agency have the resources to reassess and redesignate flood risk areas from low to high risk with sufficient speed to ensure that insurers can respond accordingly? What further powers are the Government proposing to give to the Environment Agency to ensure that no further properties are built in high-risk flood areas against its advice, as can happen at the moment?
These are all issues that need to be addressed if Flood Re is to achieve its true potential. I hope the Minister can address them. I look forward to his response.
I thank noble Lords who have contributed to the debate. I will address the questions put to me.
As has been noted, the levy will reduce from £180 million to £135 million per year for the next three years. That is based on an assessment that £135 million is what is needed. The view is that we do not want to set the levy higher than it needs to be because it is effectively a form of tax.
I note the arguments put forward by the noble Baronesses, Lady Bakewell and Lady Jones, that everything suggests that flood risk is increasing and that volatile weather patterns are likely to become more so, but the scheme is not designed to be the UK’s answer to flood risk; it is a part of the answer. There is a whole bunch of other policies designed to make the UK more resilient in the face of increasingly volatile weather. For example, a major component of the environmental land management subsidy system is about better land management to create more resilience. Our tree strategy, the peat strategy and so on are all different components of it. There is the grey infrastructure component of the work Defra is doing as well. This is just part of the much wider approach the UK is taking.
The scheme is financially secure. Flood Re has met its initial liquidity and capital requirements and has a high solvency ratio. The Government have undertaken the necessary due diligence to assure themselves that Flood Re has enough funds to cover any losses as a result of a major flood event. The Government Actuary’s Department agrees that £135 million is suitable and well within the risk appetite of Flood Re.
The noble Baroness, Lady Bakewell, asked about the liability limit. Flood Re has set the liability limit at £1.9 billion from 1 April 2022 for the following three years. This is a non-statutory change already approved by the Secretary of State for the Environment, aligned with the Government’s assurance process.
Build back better will play a key role in helping to increase the resilience of UK households to flooding. We hope that it will drive a cultural shift across the insurance market, driving positive changes in supply chains, raising awareness and demand for property flood resilience, and helping to capture the evidence on the benefits of property flood resilience to support future changes in the market.
Research by Defra and Flood Re has demonstrated that the additional investment for flood resilience over standard repair can be as high as £35,000, but averages to around £5,200. However, the Government recognise that the cost of making different properties resilient may still exceed the contribution from build back better. Insurers and/or the householders can choose to pay for build back better above the £10,000 cap if that is what they want to do.
The noble Baroness, Lady Jones, asked whether the scheme is open to farm buildings. It is open to them but not to outbuildings—the precise definition of which I am unable to offer her now but I will do so if she asks me to follow up in writing.
Build back better is being introduced on a voluntary basis, as I have said. The reason why it is not a mandatory scheme is that we calculate it is very much in the interests of the insurance companies to buy into it, if additional flood resilience measures have a knock-on effect in terms of the costs they are likely to bear going forward. Insurance companies that cede to the scheme can choose whether to offer build back better to their customers, but I am encouraged to hear that insurers representing a big proportion of the home insurance market have already applied to participate. While the noble Baroness was talking, I tried to find exactly how many have signed up, but I am afraid that I do not have the figures so will come back to her. However, I am assured that it is a significant proportion of the market.
Property flood resilience is a nascent market. At this early stage, we want insurers to adopt build back better, embed it into their processes and encourage innovation and learning by doing. Flood Re will work with insurance companies to capture and contribute data and insight to assist the development of an evidence base on the impact of the policy and property flood resilience. Flood Re will encourage insurers to meet best practice when implementing build back better and will set out its expectations in the scheme’s treaty and underwriting guide. This will include recommending assessment surveys and that proposals for measures and installations are underpinned by the property flood resilience code of practice, and highlighting the training opportunities available and the BSI standards and kitemarks for insurers to use.
The Government will publish a road map by the end of 2022 to further accelerate take-up of property flood resilience measures. This will ensure all relevant bodies are playing their part and that consumers can have assurance about the quality of products and their installation. The Government have the option of tightening the regulations in the future, should that be necessary, following the publication of the PFR road map, which will identify the action required by government and industry to successfully underpin the property flood resilience market.
These changes will come into force on 1 April 2022, subject to the will of Parliament. Build back better will be a business decision by insurance companies. It will be for insurance companies that cede policies to the scheme to opt into build back better and to choose how best to offer it to their customers. The Government expect participating insurers to begin offering build back better to their customers soon after these regulations come into force.
I hope that I have covered the questions put to me. The scheme is necessary; it helps improve the efficiency and effectiveness of the Flood Re schemes and builds a nation more resilient to climate change. I hope that I have reassured noble Lords on their questions.
Before the Minister sits down, one question that I do not think he addressed was about high-risk flood areas. At the moment, you can access the scheme only if you live in a high-risk flood area. Obviously, that is a moveable feast these days because of extreme weather events, so it would not necessarily be the traditional areas that get flooded. There could be flash flooding in many parts of the country for all sorts of reasons. How often does the Environment Agency update that information and allow new properties to come onstream to be insured under the scheme? If we are not careful, it could become outdated very quickly and not be available to all those categories of homes that need it.
The noble Baroness makes an important point. I am told that the Environment Agency will reissue a map of flood risk some time in 2024. As she says, even that new map will need to be continuously updated. One hopes that those areas at high risk today will not necessarily be at high risk in the years to come if the measures that we invest in now are carried out appropriately and if our rationale and assumptions are correct.
National Minimum Wage (Amendment) Regulations 2022
Considered in Grand Committee
My Lords, the purpose of these regulations, which were laid before the House on 31 January 2022, is to raise the national living wage and the national minimum wage rates on 1 April 2022.
We are committed to making the UK the best place in the world to work and build a business. The pandemic has presented extraordinary circumstances. The labour market shows strong signs of recovery but both workers and businesses will be concerned about the rising cost of living. Our approach must always balance the needs of both.
The UK labour market’s recovery from the pandemic is one to be proud of. The current number of payroll employees is over 400,000 more than pre-pandemic levels, and unemployment has fallen to 4.1%. This success is in no small part due to government intervention, most notably the Coronavirus Job Retention Scheme, which supported more than 11 million jobs over the course of the pandemic. The UK’s economic recovery has been no less impressive. GDP at the end of 2021 recovered to the pre-pandemic level and increased by an estimated 7.5% over the year.
However, we are aware that a key issue on people’s minds is the rising cost of living. We have already acted to support households with rising energy bills. We recently announced a package of measures worth £9.1 billion for 2022-23, including a £200 reduction in energy bills and a £150 rebate on council tax bills for all households in bands A to D in England. These are in addition to measures that we have already announced, such as cutting the universal credit taper rate and freezing fuel duty for the 12th year running.
Central to managing the cost of living in the long term is the creation of a high-skill, high-wage economy. We are committed to doing just that. Through policies such as the plan for jobs, we are helping people get into work and gain the skills they need to prosper, progress and succeed. We are also committed to supporting the lowest paid on this issue. Since 2015, we have increased the national living wage significantly faster than average wages and more than twice as fast as inflation, meaning more money for the lowest-paid workers. The increase in the rates this year will continue to protect the lowest paid against the increase in the cost of living.
These regulations will increase the rates of the national minimum wage and the national living wage from 1 April. We estimate that these will provide a pay rise to around 2.5 million workers. I am pleased to say that the Government accepted all the rate recommendations made by the Low Pay Commission in October 2021. The commission is an independent body that brings together the views of business and workers and is informed by expert research and economic analysis. Once again, I express my gratitude for its excellent work and well-informed recommendations.
The Government have a target for the national living wage to equal two-thirds of median earnings by 2024. Commissioners made their recommendations last October, taking into consideration the target and the strong economic and labour market recovery to that point alongside the remaining uncertainty and feedback from a wide range of stakeholders. We are delighted that this increase keeps us on track to reach our target for 2024; we remain committed to it. The Low Pay Commission made its recommendations on the basis of significant stakeholder evidence from business, workers and academic representatives. Businesses spoke of the variety of concerns they faced at that stage of recovery, as well as how they continue to plan for the future based on our target for the national living wage.
These regulations will increase the national living wage for those aged 23 and over by 59p to £9.50—an increase of 6.6%. A full-time worker on the rate will be more than £1,000 better off over the course of the year. The regulations will also increase the rates for younger workers and apprentices. Workers aged 21 and 22 will receive an increase of 82p an hour—a 9.8% increase—to see a minimum hourly rate of £9.18. Workers aged between 18 and 20 will be entitled to an extra 27p an hour, taking their rate to £6.83. Under-18s will have a 4.1% increase of 19p, to an hourly rate of £4.81. Apprentices aged under 19, or those in the first year of their apprenticeship, will receive an increase of 11.9% to an hourly rate of £4.81—51p more. This rate will remain equal to, but separate from, the under-18 rate. The regulations will also increase the amount that employers can charge workers for accommodation without it affecting their pay for national minimum wage purposes. From 1 April, it will be £8.70 per day.
Looking ahead, the Government have pledged to continue raising minimum wage rates. As set out in our manifesto, we have set a target for the national living wage to reach two-thirds of median earnings by 2024. To improve fairness for younger workers, we also have a target to further reduce the age threshold for the national living wage, making it apply to those aged 21 and over by 2024. These targets remain dependent on economic circumstances, and we will monitor the labour market carefully.
In conclusion, these regulations ensure that the lowest paid are fairly rewarded for their contribution to the economy. The Government will continue to monitor the impacts of increasing the minimum wage and will remain abreast of concerns about the cost of living. We will shortly publish the remit to the Low Pay Commission for 2022, asking it to provide recommendations for new minimum wage rates to apply from April 2023. I commend these regulations to the House.
My Lords, I thank the Minister for his introduction and welcome the fact that the figures are being increased. The support of the Government for having a minimum wage is to be welcomed. The Bible tells us that reformed sinners are to be welcomed. It does not say that we should not remind them of their previous sins. To be honest, I wasted a bit of time re-reading the Second Reading of the National Minimum Wage Bill in your Lordships’ House in 1998. I have several good quotes. The Conservative Front-Bench spokesperson said:
“If the Government go ahead with this legislation they will have to accept that business closures will lead to extensive unemployment in country areas.”—[Official Report, 23/3/98; col. 1078.]
There are several other statements on a similar theme. So I extend a welcome to a reformed sinner.
The second, brief point I will make is that of course this is not the real national living wage, as I am sure the Minister is aware. There was a national living wage before the Government co-opted the title, and it is somewhat greater than the figure being presented to us today. So I ask the Minister: have the Government considered the continued gap between their version of the national living wage and what I regard as the real living wage?
Finally, my main point, and why I am here today, is on the issue of pensions. I argue, and ask the Minister to accept, that a national living wage has to have built into it sufficient resources so that people can retire on a decent pension. A national living wage should encompass not just the day to day but a reasonable pension when the recipient of the national living wage comes to retirement. The Low Pay Commission reported on a submission from the TUC setting out that point in some detail—it reported on it but did not respond to it. If you dig down through what the Government are doing on pensions, you see that they are simply adding a margin that reflects what a typical employer does. It begs the question: is that sufficient to provide a decent pension when people get to retirement? The answer is that it is not.
Of course, some low-paid workers miss out on any pension at all. A worker on the minimum wage working less than 12 hours a week will miss any opportunity of an automatic enrolment pension because they are not entitled to one. If they work less than 20 hours a week, they have to request employer pension contributions. There is no automatic entitlement, and we know from experience how important that is in incorporating people into the pensions system.
So we have a minimum wage that fails to deliver an adequate pension. A worker on 32 hours a week on the proposed level of the minimum wage will earn a bit under £16,000 a year. That results, given next year’s earnings limits, in an annual pension contribution from employer and employee of £765. If they maintain this level of contribution for 40 years and we assume average investment returns of 2.5%, they end up with a pension pot of less than £50,000. That is insufficient to provide that worker with an adequate pension.
Clearly, there are other things. The Government are on record as “sometime, sometime, never” increasing the minimum contributions. In the meantime, the Low Pay Commission should build into its calculations the cost of providing a decent pension. I invite the Minister to pass on the message to the Low Pay Commission that pensions are part of pay and that the minimum wage should cover the cost of a decent pension.
My Lords, I thank the Minister for his introduction to these proposals, and the Low Pay Commission for the thorough and very persuasive way it has drawn up its recommendations. The labour market during the Covid era was undoubtedly worrying, but it is good to see the evidence that, since the economy has started to pick up, pay growth has been the strongest for low-paid workers. As a result, the proportion of the workforce reliant on the national living wage has fallen from 6.5% to 5.4%.
We therefore welcome the decision of the Low Pay Commission to get back on course to meet the national living wage target of reaching two-thirds of median earnings by 2024. We therefore support the increase of 6.6% in the rate, lifting it to £9.50 an hour for those aged over 23, and the subsequent rates that follow on from that.
These recommendations were finalised in December 2021, but since then we have had rising inflation, a rising cost of living and now the reality of huge increases in energy bills. The Minister referred to that. Has any provision been made for the Low Pay Commission to monitor those significant surges in the cost of living, and potentially to make emergency adjustments to the pay rate to ensure that the lowest-paid workers can survive the coming financial crisis without falling into debt? In the first instance, I suggest that the Government could go further and scrap the national insurance increases, and indeed adopt Labour’s policy of a minimum wage of at least £10 an hour, which would go some way to alleviate the pain.
I also support my noble friend Lord Davies’s point about pensions. He made an important point about pension payments needing to be factored into the living costs of the lowest paid. They therefore should be included as part of the statutory scheme.
Moving on from that, I ask the Minister: what happened to the other recommendations in the Low Pay Commission report? Will they come before us separately? I read the report, and it is clear that the commission has, for example, done a great deal of work on the domestic workers exemption, where staff such as au pairs and domestic servants live with a family. As it says in its report, it heard a great deal of distressing evidence from individuals whose hidden voices are rarely heard. As a result, it made a definite recommendation to remove the domestic worker exemption in Regulation 57(3) of the 2015 regulations. What happened to that recommendation?
Secondly, the commission addressed the issue of the pay for individuals involved in sleep-in shifts in social care. This was subject to a Supreme Court ruling this year, leading to calls for more clarity and consistency. The Low Pay Commission identified that there was a variety of practices across the sector, with payments “unregulated” and
“determined by negotiation between commissioning bodies, providers and the workforce.”
It concluded that any further clarification should be “linked to wider plans” for social care funding currently being considered by the Government. Can the Minister confirm that this issue is being considered in the context of the social care reforms, and that adequate money is being set aside to encourage new people into the sector, including those required to sleep over with those for whom they are caring? If we are not careful, this issue, which the Low Pay Commission has flagged up, will fall between all of these stools: it will not be delivered as part of the minimum wage recommendations and it will not be part of the social care reforms either. Once again, those care workers will fall through the crack.
Finally, we welcome the fact that the commission will carry out further work on the impact of low pay on those with protected characteristics, including younger, older, disabled and women workers, and workers from ethnic minorities. We recognise the complexities of untangling the cause and effect of these trends, but given the undoubted pay gaps that we know exist, we believe further measures may be required to rebalance the pay and employment opportunities of these disadvantaged groups.
I hope that the Government’s remit to the Low Pay Commission for next year will ask it to do further work on this issue so that we can be completely satisfied that the pay rates are being sufficiently addressed. I look forward to the Minister’s response.
I thank the noble Lord, Lord Davies, and the noble Baroness, Lady Jones, for their valuable contributions to the debate. The points raised demonstrate the importance of providing a pay rise to workers, and both noble Lords welcomed the increases.
The national minimum wage and national living wage make a real difference to millions of workers in this country, and I am obviously glad that there is cross-party agreement in the House that these increases, which will help to protect workers in all parts of the UK from increased inflation and protect their standards of living, should proceed. It is just a shame that the Liberal Democrats obviously did not consider it important enough to join us for this debate, but I am glad that the other two noble Lords have. The national minimum wage and national living wage have increased every year since their introductions. The regulations mean that, on 1 April, full-time workers on the national living wage will earn over £5,000 more than they did in 2015, when it was introduced.
Everyone will note that, once again, the Government’s impact assessment has received a green fit-for-purpose rating from the Regulatory Policy Committee, which is just as well because I am the Minister responsible for that committee. The impact assessment estimates around 2.5 million low-paid workers will benefit from the minimum wage increase. We estimate there will be a total wage benefit to workers of about £1.3 billion. The total cost to employers for implementing the LPC’s recommended rate is estimated at £1.6 million. This marks a 42% increase in the national living wage since the policy was first announced in 2015. Of course, younger workers will also get more money from the increases to the national minimum wage.
I turn to the points raised by the noble Lord, Lord Davies. The Government of course consider the expert and independent advice of the Low Pay Commission when setting these rates. We reward workers with the highest possible minimum wage, while considering the impact on the economy and, of course, the affordability for businesses. The Low Pay Commission draws on economic, labour market and pay analysis, independent research and stakeholder evidence. The key distinction between the Low Pay Commission rates and the other rates, such as the Living Wage Foundation’s voluntary living wage, is that the Low Pay Commission has to consider the impact on businesses and the economy.
I turn to the next point that the noble Lord, Lord Davies, raised on pensions. From April, the full yearly basic state pension will have increased by over £2,300 in cash terms since 2010. The overall trend in the percentage of pensioners living in poverty is a dramatic fall over the recent decade. There are 200,000 fewer pensioners in absolute poverty, both before and after housing costs, than there were in 2009-10. The Low Pay Commission considers all aspect of low pay when making its recommendations for minimum wage rates.
I move on to points made by the noble Baroness, Lady Jones. In response to the points about the Low Pay Commission considering the change in the cost of living, we consider the expert and independent advice of the commission when setting the rates. The LPC’s remit is for the national living wage to reach two-thirds of median earnings by 2024, subject to wider economic conditions. Since its introduction, the national living wage has grown more than twice as fast as consumer prices. This year’s increase will be the largest ever in cash terms and will help to protect the income of 2 million low-paid workers against the cost of living. In April, a full-time worker on the national living wage will see their annual earnings rise, as I said, by over £1,000. I also said in my introduction that we will shortly publish this year’s remit for the Low Pay Commission, which will once again continue to consider a wide range of stakeholder and academic evidence.
On the point made by the noble Baroness about social care, we are incredibly proud of all the work that our health and social care staff do and recognise their extraordinary commitment. The 1.5 million people who make up the paid social care workforce provide an invaluable service to the nation—and did so especially during the pandemic. The noble Baroness will be aware that we recently brought forward our strategy for the adult social care workforce in the People at the Heart of Care: Adult Social Care Reform White Paper. That was backed by at least £500 million to develop and support the adult social care workforce over the next three years. This historic investment will enable a fivefold increase in public spending on the skills and training of our direct care workers and their registered managers. This will include hundreds of thousands of training places, certifications for care workers and the professional development of the regulated workforce. It will help support our commitment to ensure that those who receive care are provided with choice, control and support to live independent lives, that they receive outstanding quality and tailored care, and that people find social care fair and accessible.
Since the introduction of the national living wage in 2016, care worker pay has also increased at a faster rate than ever. So I hope that the noble Baroness will accept that we remain committed to supporting worker protections through this crucial policy and to ensuring clarity for businesses on how the policy will develop over the next few years. We will also run a communications campaign alongside the uprating, thereby helping workers to check their pay and supporting businesses to make the necessary changes. We will also continue to monitor the labour market closely over the coming months. We will continue to prioritise enforcement of the minimum wage through HMRC’s ongoing work and the naming scheme, where we will continue to name employers who have underpaid their staff. We named 208 employers on 9 December 2021, including some of the UK’s biggest household names. To date, we have named more than 2,500 employers.
As the noble Baroness also mentioned, the Minister for Small Business, my colleague Paul Scully, confirmed in the House of Commons that we will bring forward regulations to remove the exemption from minimum wage legislation for so-called live-in domestic workers such as au pairs. This change will newly extend this right to them, ensuring that those workers receive the wages that they deserve and that we thereby do our bit to help tackle exploitation.
I again thank the Low Pay Commission and its staff for gathering the extensive evidence and providing well-reasoned recommendations. It gives me pleasure to commend these regulations to the House.
Committee adjourned at 3.30 pm.