Report (1st Day)

Part of Pensions Bill – in the House of Lords at 5:00 pm on 24th February 2014.

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Photo of Lord Freud Lord Freud The Parliamentary Under-Secretary of State for Work and Pensions 5:00 pm, 24th February 2014

My Lords, losing a spouse is one of the most tragic circumstances that a person will have to endure and, as such, it has been recognised since the outset of the welfare system that the bereaved need some financial assistance. Bereavement benefits form a crucial part of state support but limited reforms over the years have led to a complex system, which has not kept pace with changes in the benefit system or wider changes in society. This legislation will address this. With a simple payment structure focusing support on the period immediately after the bereavement and a single contribution condition, the new bereavement support payment will be far more easily understood and claimed. It will mean that more people will benefit, particularly younger widows.

A claim to the new bereavement support payment is made by the surviving spouse or civil partner. The noble Baroness, Lady Finlay, raised those extremely tragic cases where not only is there one bereavement but the surviving spouse dies shortly afterwards. She is of course right that there can be no expectation that a claim is made by the surviving spouse in such circumstances. I take this opportunity to make it absolutely clear that, as with the current benefits, there will be arrangements in place for claims to be made posthumously. Every year, the Department for Work and Pensions receives around 10 posthumous claims to bereavement benefits made on behalf of a bereaved spouse who has subsequently died. There are regulations to ensure that appropriate payment can be made in respect of these claims.

Currently if a person who would have had an entitlement to a bereavement benefit themselves dies, regulations allow the DWP to appoint a third party to act on their behalf and make a claim. Once a person has been appointed to act on behalf of the deceased they have six months from the date they were appointed to make a claim. The amount awarded following a posthumous claim would match the entitlement the deceased would have had if they had made a claim. I can assure the noble Baroness that the regulations will be updated so that this practice will continue under bereavement support payment. With regard to guardian’s allowance and child benefit, the payment of these benefits is not affected by the award of current bereavement benefits, and this relationship will remain unchanged under bereavement support payment. It is worth saying that, due to the design of new bereavement support payment, such posthumous awards will be higher than under the current system because the new benefit is made up of a higher initial lump sum and monthly instalments.

Let me now spend a little time explaining exactly why we have decided to design the benefit as a higher lump sum and 12 subsequent monthly instalments. This is an issue that the noble Baroness, Lady Finlay, and the right reverend Prelate the Bishop of Wakefield raised. The counterargument is that bereavement has long-term implications for families. I understand this, and I realise that after a single year bereaved families will still be suffering and will be in need of support.

My point—and I hope it does not sound too counterintuitive—is that, looking at the welfare system as a whole, I am convinced that the best way to provide this support is through a shorter-term payment of bereavement support payment and a longer-term income replacement benefit in the shape of universal credit. If we pay the bereavement support payment for a longer period—for example, for three years—it could be done in a cost-neutral way only by reducing our proposed payment and spreading it over a longer period. This would mean providing less money in the period directly following bereavement. From the responses to the public consultation and the findings from the independent social research, it is clear that, regardless of household income, the death of a spouse has a significant financial impact which is acute in the initial months following bereavement. That is why we have decided to focus the benefit on the shorter term when the need is greatest. Let me be clear that this shift is not about saving money. In fact, we will be spending £110 million more over the first four years after implementation than if the current system had rolled forward.

My greatest concern about extending the duration of the bereavement support payment is when you consider the welfare system as a whole. The fundamental design principle of the new benefit is that, as a short-term payment designed to address the additional costs of bereavement rather than everyday living costs, it is clearly distinct from income replacement benefits or pensions. This means that we can fully disregard the payments from universal credit and benefit cap calculations, and this will clearly benefit the less well-off. For example, an unemployed single parent with one child who is entitled to bereavement support payment could receive £9,800 in the first year. In addition, they could receive the standard allowance and the child element of universal credit, which is more than £7,000 a year. On top of this, they may also be able to access other support such as help with housing costs. By extending the duration of the payment, the benefit would resemble an income replacement benefit and would need to be treated as such in the calculation of the benefit cap and universal credit. If we assume that we carried on paying the instalments at the rate of £400 per month, universal credit recipients in the poorest income quartile could lose around £4,800 per year and up to £15,000 by the third year. Our analysis shows that any increase in duration accompanied by removal of the bereavement support payment disregard from UC and taxation of instalments is effectively a transfer of money from poorer to richer recipients.

We are also concerned that a longer payment would be likely to be classified as a survivor’s pension under EU social security co-ordination rules. This would impact on the cost of other benefits, notably healthcare, sickness and family benefits. Analysis shows that if bereavement support payment is treated as a survivor’s pension and is paid over a three-year period, the costs of the bereavement benefit could increase by £400 million, which is four times higher than our planned investment of £110 million.

I turn to the conditionality regime, the issue which noble Lords spent most of this debate on. Our debate in Committee made me go back and think about this whole area from scratch. I will go into the final element—the review—which I touched on earlier and which is a way of thinking about the whole area, not just for this narrow group.

Bereavement has a long-lasting effect on families. We should never lose sight of the fact that the support we provide should not just be financial but help the bereaved to adjust to their situation and regain control of their lives. This process of adjustment varies hugely according to each individual; in particular, bereaved parents draw on a wide range of support mechanisms to get themselves and their children through. For those who are not in work or who have stopped working, part of this process of adjustment is looking to return to work. We know that long periods out of the labour market can have a negative effect on a person’s emotional and psychological well-being. This is why the Government also have a responsibility to help people regain control of their lives: universal credit helps people to do this.

I turn to the timing of when parents feel they need to go back to work. IFF Research concluded that:

“Most people thought it acceptable for the state to make contact following bereavement to offer employment support”,

as long as the approach was “individual and sensitive”, and,

“the typical timeframe suggested was between six and 12 months after the bereavement”.

I agree that supporting children should be every parent’s first priority. This is why universal credit ensures that bereaved parents are never subject to conditionality for the first six months. After this initial period, universal credit offers tailored support. Parents or lead carers of children under five are not expected to work and therefore will not be required to look for and apply for jobs. For those parents with children over five, work- related requirements are still tailored. Parents of children under 13 will be required to look only for work that is compatible with school hours. Parents of older children may have the hours that they are expected to be available for work tailored to the specific care needs they have in relation to the child.

I stress that we have no intention of requiring bereaved parents with childcare responsibilities to take jobs that do not take into account their children’s needs. This engagement is intended to be supportive—for example, supporting with confidence-building or training where a bereaved parent is entering the labour market for the first time or changing career path. Claimants’ individual circumstances are always considered before conditionality is applied and the current legislation allows for some to continue without any conditionality. A move to a fixed, 12-month conditionality exemption, as the noble Baroness’s amendment suggests, assumes that bereaved parents do not want the state to offer support in this period. This is wrong—