COMMITTEE FOR SOCIAL DEVELOPMENT

OFFICIAL REPORT
(Hansard)

 Welfare Reform Bill

 17 May 2007

 

Members present for all or part of the proceedings:

Mr Gregory Campbell (Chairperson)
Mr David Hilditch (Deputy Chairperson)
Mr Mickey Brady
Mr Thomas Burns
Mr Fred Cobain
Mr Jonathan Craig
Ms Anna Lo
Mr Fra McCann
Mrs Claire McGill
Miss Michelle McIlveen
Mr Alban Maginness

Witnesses:

Mr Gerry McCann (Department for Social Development)
Mr John O’Neill (Department for Social Development)
Ms Doreen Roy (Department for Social Development)
Ms Margaret Sisk (Department for Social Development)

The Chairperson (Mr Campbell):
I welcome Mr John O’Neill, Mr Gerry McCann, Ms Margaret Sisk and Ms Doreen Roy to the meeting, which Hansard will record. Perhaps, Mr O’Neill, you would give the Committee a brief overview of the Welfare Reform Bill and then concentrate on the housing benefit issue. As you know, Committee members have several concerns about that aspect of the Bill.

Mr John O’Neill (Department for Social Development):
Are you talking about the payment of housing benefit?

The Chairperson:
Yes, members are concerned with the delivery mechanism for the payment of housing benefit.

Mr O’Neill:
The Welfare Reform Bill is a parity measure to parallel the Welfare Reform Act 2007, which received Royal Assent in Great Britain on 3 May. Originally, it was intended that the Bill would have been passed as an Order in Council under direct rule, but there was insufficient time between the Act being passed in GB and devolution taking place, so the Bill is now being put to the Assembly. This is the latest stage in an ongoing programme of welfare reform that started in 1999.

The Bill covers several main areas. First, employment support allowance (ESA) will replace incapacity benefit. It will also replace income support awarded on grounds of incapacity. ESA will be established as an additional benefit. Although the existing benefits will remain, existing benefit recipients will move to ESA at some point; however, the date has not yet been determined.

ESA will have a new structure, which will incorporate a contributory allowance, which is similar to incapacity benefit, and an income-related allowance, which is similar to income support. Entitlement to ESA will be based on a person being assessed as having a limited capacity or capability for work because of a physical or mental condition and satisfying certain other conditions. The impact of the person’s condition will be determined on the basis of a medical examination in which the general practitioner will be involved. Other healthcare providers can be involved also, and the Department will make available doctors and other healthcare professionals.

The matters to be determined are whether a claimant’s capability to work is limited by his or her physical or mental condition to the extent that it is not reasonable to require him or her to work, and whether their capacity for work is limited to the extent that it is not reasonable to require them to engage in work-related activity.

Under the present rules for incapacity benefit, when the benefit is awarded, that is that — the person gets the money. Under the rules for ESA, people will not be left on benefit. Measures will be taken to assess their ability to undertake work-related activities and, perhaps, get back into work. We know from experience that many people who are on incapacity benefit want to get back to work. There is also evidence that people who are on incapacity benefit for more than 18 months are likely to retire, or die, while on benefit.

Assessments will be carried out during an assessment phase, which will last for 13 weeks. Claimants will then become entitled to either the work-related activity component or the support component.

There will be work-related conditionality. Claimants will be entitled to additional benefit in the form of a work-related activity component. Examples of work-related conditionality include claimants being asked to take part in work-focused, health-related assessments, which will be carried out by trained health professionals and which will provide additional information about their functional capability. The assessments will explore health-related interventions and the claimant’s perception of his or her condition. There could be work-focused interviews or, indeed, work-related activity.

Work-related conditionality will be based on the regime already in place for the Pathways to Work programme, which has been in place in Northern Ireland since October 2005. That programme provides participants with access to a range of support, particularly with regard to health-related, personal and external barriers to work. Participants are required to attend and participate in work-focused interviews. The Pathways to Work programme is in place in 14 areas and a full roll-out will be achieved by April 2008 in advance of the proposed introduction of ESA in October 2008.

All claimants will be treated sensitively, and safeguards will be put in place, which will be geared particularly to people with mental health problems. Most people will benefit from engaging with the community through some form of work-related activity.

There are no plans to make work-related activity mandatory, but the Bill contains a provision to allow that component of the benefit to be reduced if a claimant fails without good cause to undertake such assessments, interviews or activity as may be required. However, the Bill is not designed to force people off benefits and into work. It aims to offer people the necessary help and support to get them ready to return to work. In return, claimants are expected to engage with that help and support.

The Bill makes provision for the introduction of a local housing allowance in the private rented sector and changes to the design and administration of housing benefit. The current housing benefit system is quite complex. It restricts the choice for low-income tenants, hinders them from taking responsibility for their finances and makes it more difficult for them to move from living on benefits to working.

There have been long-standing difficulties with the design of the benefit, particularly the complexity of the rules. The Bill will introduce the local housing allowance that is designed to ensure that the same amount of benefit is paid to tenants in similar circumstances who reside in the same area. The intention is to reduce barriers to work, ensure that people on low incomes can afford a decent home that meets their needs, extend tenants’ personal responsibility for paying their rent and provide a better, quicker service based on simple rules.

The Chairperson made a point about the payment regime. At the moment, the general arrangement is that payment is made to the landlord, but the existing legislation provides for either system.

The Chairperson:
Did you say that it provides for either system?

Mr O’Neill:
Yes.

The Chairperson:
However, payment is normally made to the landlord.

Mr O’Neill:
In future, payment will normally be made to the tenant, who will pass it on to the landlord. The legislation covers only the private rented sector, not social housing provided to tenants by the Housing Executive or housing associations.

The Chairperson:
Have there been complaints from tenants about the present system?

Mr O’Neill:
No.

The Chairperson:
None?

Mr O’Neill:
No, I think that members may have seen a certain section of the study by the Joseph Rowntree Foundation that found that people are happy using either payment system. The arrangement whereby the payment is made to the tenant has been piloted in nine areas in Great Britain over 18 months and has been evaluated by the Department for Work and Pensions. The University of York and other universities examined that evaluation and found that people who moved to the new system, whereby the tenant rather than the landlord is paid, generally came to accept it. There was no increase in the levels of arrears. The number of people whose benefit was paid into their bank accounts increased, enabling them to set up direct debits, etc to the landlords so that they did not have to hand the money to them.

The Chairperson:
I just want to be clear on one point. Have tenants in Northern Ireland who are on the present system, whereby the housing benefit is normally paid directly to the landlord, not complained about that system?

Mr O’Neill:
No.

The Chairperson:
In that sense, therefore, the system is not broken.

Mr O’Neill:
No. However, there is a wider agenda, in that people who stop living on benefits and start working are no longer entitled to housing benefit but still have to pay rent. Previously they did not see the rent money, because it went directly to the landlord. The new system will enable them to prepare for work, as they will receive their rent money from the Housing Executive.

The Chairperson:
Is that the case even if it is against the tenants’ wishes?

Ms Margaret Sisk (Department for Social Development):
Yes.

The Chairperson:
Therefore, if a tenant does not want to receive the money, but wants the rent still to be paid to the landlord, will the Bill require that he receive it?

Mr O’Neill:
The Bill gives the Department the power to make regulations that will establish the norm that the money is paid to the tenant, except where the tenant is a vulnerable case, such as someone who is unable to manage his own affairs, perhaps due to alcohol or drug problems. Also, if a tenant falls into arrears of eight or more weeks, the money will be paid directly to the landlord. The aim is to get people used to greater financial responsibility, so that they are responsible for managing all payments, including rent to their landlord. It is part of the financial and social inclusion agendas to prepare people for work. However, regulations will have to be made to bring it into effect.

The Chairperson:
What are potential problems if accelerated passage is not granted?

Mr O’Neill:
The local housing allowance is scheduled to come into operation in April 2008. To enable the Housing Executive to set up its system and carry out training, the regulations must be in place by autumn 2007. That is one consideration. The Social Security Agency is preparing for the introduction of the ESA. The agency must begin spending money in 2007 in order to set up the arrangements for that. Therefore, approval is needed.

One provision in the Bill relates to the Pneumoconiosis, etc., (Workers’ Compensation) ( Northern Ireland) Order 1979. It covers asbestosis, byssinosis and mesothelioma, which are industrial diseases. The legislation is being amended in order to make it easier for sufferers of those diseases to make claims and to widen the definition of relevant employers. Similar provisions will come into effect in GB in July 2007. The longer the legislation is delayed in Northern Ireland, the longer sufferers of those diseases who wish to make claims will be denied the benefits of those easements.

The Chairperson:
What about the benefits that you mentioned at the outset? How will they be affected if accelerated passage is not granted?

Mr O’Neill:
Incapacity benefit and income support will continue as they are. However, the ESA is a benefit that will be available for new claimants from the date of introduction. Those who receive incapacity benefit and income support will continue to receive those benefits. There is provision to transfer those claimants at some stage. However, transferral of that caseload to the new system is a major exercise. Further investigation as to whether there would be winners and losers as a result of the transfer would need to be carried out. A bid would have to be made for that as part of the comprehensive spending review. There is currently no intention to deal with the existing caseload. All claimants for incapacity benefit will move to the new system from October 2008.

The Chairperson:
Has any representation been made by individual landlords or group of landlords about potential problems that they envisage?

Mr O’Neill:
No.

The Chairperson:
Are they aware of the potential difficulty?

Mr O’Neill:
Not to the Department’s knowledge.

The Chairperson:
Are they aware of the potential change?

Mr O’Neill:
Yes.

Ms Sisk:
We received a letter in 2005 from the Landlords’ Association of Northern Ireland expressing concern about the payment of housing benefit to tenants.

Mr Brady:
A point was made about the introduction of ESA to replace incapacity benefit, and people who have mental health problems were mentioned specifically. Obviously, there has been an increase in the number of those people, particularly among the young. Will qualified personnel who have medical knowledge of mental health carry out those people’s assessments? Currently, a medical referee who assesses a potential claimant is not a mental health specialist — no more of a specialist than the claimant’s GP. Will that issue be dealt with?

Mr O’Neill:
The current system uses the personal capability assessment. It has been accepted that that system is not suitable for people who have mental incapacity. The system is therefore being revised in order to make it more suitable in those cases. The revised system is being piloted in GB. The system will be fully fine-tuned and ready for introduction in October. Medical healthcare professionals who may be more suitable than doctors — occupational therapists, for example — will conduct the assessments.

Mr Brady:
I accept that. However, people are currently being assessed by doctors who are not qualified in mental health illness, which creates tremendous problems. People have failed the personal capability assessment and have been found to be capable when they were not. The doctors who assessed them were not specifically qualified in mental health. Pernicious decisions have been made in the past. That must be dealt with.

Mr G McCann:
The Department will check that and reply in writing to the Committee.

Mr Brady:
It is an issue that needs to be addressed.

Mr Hilditch:
Since devolution has been restored, the Welfare Reform Bill has been brought more into the public eye in Northern Ireland. Recently, several landlords, who know of my involvement with the Committee for Social Development, have lobbied me on the issue of housing benefit payment.

Grave concerns have been expressed. Surely, as has been indicated, the current situation — whereby people have a choice — is best for the people of Northern Ireland. Is it not better that that system is kept in place? Otherwise, the only winners are the banks. Furthermore, recovery of rent arrears for the eight-week period during which people may find themselves in difficulties constitutes a new workload for the Department.

Ms Sisk:
At present, there is no indication of how that will work in Northern Ireland, because it has not been tried. However, as John O’Neill pointed out, the system has been piloted in 18 areas in England.

The Chairperson:
I am sorry to interrupt. In your answer to Mr Hilditch, can you tell us to what extent rent arrears have accumulated in the private rented sector where there is a system of direct payment? Is there evidence of a significant backlog of rent arrears?

Ms Sisk:
To be honest, I would not be aware of such a situation. I would have to check with the Housing Executive and let the Committee know.

The Chairperson:
I would have thought that there is no such backlog, since housing benefit is paid directly to the landlord. Unless there were a logistical problem, I would have assumed that there were no rent arrears. Arrears are likely to accumulate when the money goes directly to a tenant, who may subsequently face some unforeseen problem.

Ms Sisk:
All the concerns that you raise are perfectly legitimate. They were all raised by the landlords who were involved in the pathfinder areas in England and Wales. During the pathfinder exercise, those concerns were not borne out. The vast majority of people did not allow their rent to fall into arrears.

Furthermore, although eight weeks is stipulated as the period after which payment will automatically be paid to the landlord, where there is cause for concern before that period elapses, the issue can be raised and payment examined. All sorts of safeguards will be built into the system. The idea behind that provision is to try to get people ready to return to work. People who are working, even if they are on a low income, must hand over rent to the landlord. Why should people who receive benefits be any less capable of managing their money than people who do not receive benefits?

The Chairperson:
Is there any evidence that the present system restricts those people in the private rented sector who have their rent paid directly to their landlord?

Ms Sisk:
There have been some concerns about that. Research has been done in England and Wales that shows that that is a barrier to work.

The Chairperson:
Is there any evidence that that is the case in Northern Ireland?

Ms Sisk:
In Northern Ireland, there is no specific evidence one way or the other. As far as I am aware, no research has been carried out on this topic.

Mr A Maginness:
In the private rented sector, the biggest problem is not housing benefit but the top-up that landlords demand over and above housing benefit. That causes immense problems for people in receipt of benefits, because that money must be paid out of their benefits. Members have reservations about that aspect of the Bill. Leaving aside the merits of the provision, I wonder how the Committee might assist with the technicalities. If the Bill is given accelerated passage, there will be less time and less scope for debate. The departmental officials have said that the provision gives the Department the power to introduce this measure and to make regulations.

Might I make the following speculative suggestion as to how we might proceed? The Department might tell the Committee that it understands the Committee’s concerns, but, in order to comply with parity requirements, that provision must be included in the Bill. However, in that case, the Department could undertake not to act in relation to that power, not to bring in regulations for a period of, perhaps, one year, until there has been further investigation and, when regulations are prepared, there could be further debate on the matter.

I am seeking a way forward that would allow accelerated passage, but that would, at the same time, safeguard the valid and legitimate concerns of the Committee.

The Chairperson:
Yes; that should be considered.

Mr O’Neill:
The legislation includes the power to make regulations, which would have to come before the Committee prior to their taking effect. The Committee would have an opportunity to examine the details of those proposals.

Mr A Maginness:
If draft regulations were brought before the Committee, would the Committee or the Assembly have the right to decline their exercise of power and refuse to approve the regulations?

I do not wish to be placed in a situation whereby the Committee is effectively trapped into having to create regulations due to the power provided for in the Bill and, subsequently, in the Act.

Mr O’Neill:
Those regulations would be subject to negative resolution, which means that they could be made, but that the Committee could, within 40 days, make a prayer of annulment against them.

The Chairperson:
The Minister will attend the next meeting of the Committee, and she may request accelerated passage. The Committee has several options available to it — Mr Maginness has outlined one of them. The Committee could simply agree to or refuse accelerated passage, or adopt some form of median approach whereby it could agree to accelerated passage if certain elements were excluded. A further option would be to launch a pilot study in Northern Ireland, similar to those launched in England, although there may be variations between the two studies.

Mr O’Neill:
It would be difficult to match the size of the pilot studies in Great Britain because the whole of Northern Ireland would be required as a pilot area. It would be difficult to make effective comparisons with a smaller area. The passing of the Bill does not mean that powers come into effect. The Department must take the further stage of making regulations. However, the Department could examine the situation in Northern Ireland and hold discussions with the Minister before any regulations are drafted. Those regulations would immediately come before the Committee.

Mr F McCann:
Does the payment of housing benefit extend to Housing Executive or housing association tenants?

Ms Sisk:
The direct payments do not extend to those tenants. The Bill provides for the power to allow the Department to do that at some point, if that approach were adopted. However, there are no plans or intentions to do that at this stage — either here or in the rest of the UK. The direct payments apply to private rentals only.

The Chairperson:
Has the Housing Executive indicated any concern on that matter?

Ms Sisk:
Not to us, but it could have.

The Chairperson:
The Housing Executive has made such an indication to members of the Committee.

Mr O’Neill:
One would have to examine the value for money of the Housing Executive making payments to the housing administrator, and then the administrator getting that money back from their own tenants in the form of rent.

The Chairperson:
That could be nonsensical.

Mr O’Neill:
It would have to be established whether that would be a sensible exercise.

Mr F McCann:
When the evaluation was carried out in the 18 areas in England, did it examine areas of deprivation, or expensive areas?

Mr O’Neill:
The evaluation included: urban and rural areas; inner-city areas; areas where the existing procedure was that tenants were making direct payments; and areas where that was not the case and where people using the new system, implemented slowly or on a “big bang” basis.

Mr F McCann:
Could the Committee be provided with a copy of that evaluation and the names of the towns and cities involved?

Mr O’Neill:
There are 13 copies of the evaluation report, which is quite thick. However, the Committee can be provided with the names of the areas involved.

The Chairperson:
Earlier, I mentioned trying to establish the extent of any rent arrears in the private sector under the current system.

Ms Sisk:
The Department will check that matter with the Housing Executive.

Mr Brady:
Exceptions have been mentioned, including those for people who are not capable of managing their affairs due to deprivation or drink-related problems. Surely there is a mechanism in the Social Security Agency for people to name appointees. Would it not be possible to look at cases of people who name appointees and who may not be capable of paying their landlords?

The other point that must be accepted is that people on benefits will find it hard to adjust to having their rent paid into their budget, regardless of whether or not they go on to find work — and by the Government’s own definition of income support and subsistence level, these are low rates of benefit. That issue has not been fully addressed.

Mr O’Neill:
Most people move into housing benefit from income support or other passport benefits, so they are on at least two benefits. We can have appointees. I gave some examples of what are considered vulnerabilities, but there may be wider examples. If someone thinks that they are not in a position to manage their own affairs, they can provide evidence to the Housing Executive from their psychiatric social worker, GP or whoever. The Housing Executive will examine that evidence and decide whether the individual meets the vulnerability criteria. If they do, the Housing Executive would pay the rent to the landlord in that case. The Housing Executive will also be making arrangements with the Citizens Advice Bureau to provide people with advice on how to manage their money.

Mr Brady:
I take the point, but for many people it is a huge admission to say that they cannot manage their own affairs. We are talking about two separate groups; vulnerable people who have specific medical and mental health problems and people who simply have difficulty managing debt because of the amount of benefits that they are on. The two are very different issues.

The Chairperson:
Mr O’Neill, I thank you, and your colleagues, very much for your contribution. The Committee has found it very helpful.