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Employment and Support Allowance Regulations 2008

My Lords, I am more than happy to write to the noble Lord to expand on that figure. This is £400 million over the next five years, in comparison to what the position would have been had we continued with the IB situation. I shall now deal with the point made by the noble Lords, Lord Low and Lord Taylor. We have not broken our commitment about the main phase rate for the work-related activity group. It is £84.50 and this is higher than the long-term rate of incapacity benefit at the time the statements were made. I reject the assertion that we have not fulfilled that commitment. I also say to the noble Lord, Lord Low, that no existing customer will get less than their current rate of benefit. They will continue to get the same rate. There is no question of a million customers losing benefit. The rates are, in context, £400 million in total to be spent on ESA over the next five years—in comparison to what we would have done on incapacity benefit added to the £1.1 billion invested in Pathways to Work. Typically, in the first year a claimant will be £936 better off in the ESA work-related activity, the non-incapacity benefit. More than two-thirds of people are expected to flow off that within a year of starting their claim. In the support group, claimants gain at least £29 a week and £1,131 in their first year. The ESA does focus additional resources on the most severely disabled with a higher rate of benefit for those in the support group. Among the most severely disabled, the poorest will be nearly £16 a week better off under ESA than on incapacity benefits. Although the starting rates of benefit are very similar for ESA and IB, people get more money much sooner under ESA, with most people gaining £24 a week from the fourteenth week of their claim. We believe that around £200,000 will be better off under ESA because they get more money sooner. I acknowledge that there are issues around the structure of the benefit, certainly in relation to the age addition. We believe that this is an outmoded concept and should have no place in the ESA. The age addition accepts that people go on incapacity benefit and are not going to return to employment. Therefore, we would need to pay them more, the longer they are on it. This is quite the wrong approach, which is why it does not feature in the ESA. There are issues around the lack of couples components in the work-related and support group components, but that is because we are focusing these components on individuals’ functionality. We cannot do that by having a couple’s rate to it. Overall, you will see that there is the prospect of many people gaining from this, particularly over that first year, given that we want to encourage people and help people back into the labour market as quickly as possible. There is less relevance for most in what might happen in year two or three. The noble Lord, Lord Kirkwood, made reference to the increased number of appeals. There are more decisions in ESA than on IB which are subject to appeal; for example, whether someone should be in the support-group. That is, in part, why we expect an increase in the number of appeals. The noble Baroness, Lady Thomas, raised issues around permitted work rules. We have ensured that supported permitted work rules are aligned across both strands of the benefit. A person who satisfies the conditions can undertake supported permitted work for an indefinite period. The noble Baroness was kind enough to give me a preview of what she was going to say. I have already indicated to her that, with regard to the permitted work rules, we acknowledge the issues with housing benefit and council tax benefit for those on a contributory strand. That is one of the matters that will be looked at in the review of housing benefit, announced in the Budget. The noble Baroness, Lady Thomas, also mentioned service users. The treatment of their earnings is a complicated and sensitive area which we are currently considering. I am not in a position to give a definitive answer today, but I will write to the noble Baroness with our conclusion. We are reviewing the rules around the treatment of reimbursed expenses being treated as earnings, and expect to be able to make an announcement later this year. The noble Lord, Lord Kirkwood, asked about uprating. We review all social security rates every year as part of the annual uprating exercise. Furthermore, we consulted the SSAC informally about the ESA regulations, even though we were not required to do so. The noble Lord also asked about the Budget settlement. We are investing hugely in Pathways to Work—I have mentioned the £1 billion over the next three years—and we are moving towards an agreement with the Treasury to reinvest savings, as Adam Sharples, who was quoted, has indicated. The noble Lord, Lord Low, asked about disabled students losing out under ESA. The changes under ESA will simplify the existing complex rules for qualification for customers and staff and will ensure that disabled students can continue to claim income-related incapacity benefits where they receive any component of disability living allowance. We believe that receipt of disability living allowance is the correct way of qualifying for education, with income-related employment and support allowances. As DLA is based on how a disability impacts on an individual’s life, it will ensure that the most vulnerable customers will be able to study and receive income-related ESA. The noble Lord, Lord Taylor, asked about income tax, particularly for people on the contributory strand. Contributory ESA is taxable in broadly the same way as incapacity benefit, and income-related ESA is not taxable. That therefore mirrors the current system. Customers on contributory benefits do not, as a general rule, have their income or capital taken into account in assessing benefit entitlement, and so may have additional income as well as their benefits. But a person whose only taxable income is contributory benefit is unlikely to have an income which results in a tax liability, made more certain by the increases in personal allowances which have just been announced. If you are on only the contributory strand with no other income, you are unlikely to be in the income tax system. Of course, income-related benefit is not taxable because it is withdrawn at one-for-one if the claimant has other income. I have tried to deal with as many of the questions as I can in the time available. I hope that my answers have dealt adequately with the concerns expressed today. I will review the record and follow up with further correspondence in so far as I have not had time to deal with the multiplicity of points that have been raised. The regulations are a vital part of our ambition to create a fairer and more inclusive society where people with health problems and disabilities are better able to fulfil their aspirations. I therefore hope that the noble Lord will not press his Prayer.