We move on to part 3 of the Bill, which relates to reforms of bereavement support payments. It may help to explain the purpose of amendments 1 to 3 if I briefly explain the framework of the reforms contained in clauses 27 and 28.
As the Committee will know, with the exception of changes made for widowers about a decade ago, the system of support for bereaved families has been largely unchanged since the post-war period. It was very much based on the assumption that men went out to work and women stayed at home—a woman who lost her man, lost her income, and therefore needed a national insurance benefit for herself and her dependent children. It is perfectly proper for a Government in the 20-teens to ask whether that model is any longer appropriate.
The current model has several problems. For childless widows and widowers, there are obscure and complex age rules. For example, what one might think of as the widow’s pension, or the bereavement allowance, is not payable at all for those under 45. It is payable on a tiered basis up to the age of 55, and then there are complicated contributions rules overlaying all that. Most people would feel that that is a degree of complexity. For someone who is a young widow or widower, it is hard to see why there should not be an entitlement to any help over the following 12-month period. Therefore, dealing with the gaps in the system is one factor.
The second factor is the support given to bereaved parents. As I said, the existing system almost reflects a 1940s model: a bereaved parent has lost the breadwinner, who would have supported them for as long as their children were children, and therefore, that person should have an allowance that runs for 16 years, 18 years, or whatever. Although absolutely nobody would want to be in a bereaved parent’s position, the reforms are trying to focus the financial help that is given to bereaved parents on the time of bereavement and the immediate period thereafter, while putting in place a longer-term system of financial support for those who do not return to the labour market. Therefore, the idea of the reforms, both for the childless and for bereaved families with children, is to concertina the support into a substantially increased grant, death grant, or lump sum, consisting of several thousand pounds more than the current figure, we envisage. Monthly payments will then be paid over the following 12 months; those are essentially a broken-down bit of that first lump sum. Essentially, that replaces an ongoing weekly pension that can go on for the best part of two decades, in extreme cases, with very substantial help in the first part of the period.
One of the changes we are making is to relax substantially the national insurance contribution rules. Whereas the bereavement allowance currently requires extensive payments—a lifetime’s worth—of national insurance for a full pension, we think that is simply inappropriate. In fact, the contribution rules have been so dramatically relaxed that we require only 25 weeks’ national insurance. In other words, someone must spend less than a year in the system to qualify for the payment. A problem with that, which we identified after we printed the Bill—as the Committee might work out, that is why we have tabled the amendment—is that that would mean that bereaved people around the world, who, I hesitate to say, even if they had not seen the white cliffs of Dover, had certainly spent six months in the country paying national insurance, would qualify for a bereavement lump sum. Given that the amounts of money are substantial, we did not think it the priority for the British taxpayer to pay bereavement support payments to bereaved people around the world—although, of course, we sympathise with them—who have simply had a passing acquaintance with the country.
Amendments 1, 2 and 3 together set out that there will be a test of being ordinarily resident in the country, of the sort that is familiar in the benefit system. Amendment 1 would prevent persons living in a non-EEA or non-reciprocal agreement country, without a close connection to Great Britain, coming to the country to claim the benefit. Amendment 2 provides that the Secretary of State will make regulations that specify the rate and period of payment. Amendment 3 provides that regulations may specify countries other than Great Britain in which a person has to be ordinarily resident, such as elsewhere in the EU, to be entitled to the bereavement support payment. In a sense, the set of amendments—the matters we are dealing with narrowly at this point—simply try to ensure that we pay the money to people who have contributed to the system and who are ordinarily resident here, which I am sure is what the public and Parliament would expect us to do. On the strength of that, I commend the amendments to the Committee.
“leave out ‘Regulations are to’ and insert ‘The Secretary of State must by regulations’.”?
Bluntly, what is the amendment’s point and how does that change materially affect the Bill?
I am grateful to the hon. Gentleman for that question, because, as I entirely accept, the answer is not self-evident. I can reassure him that it is a minor and technical amendment, clarifying that the Secretary of State will—that is the important word—make regulations under subsection (2), which specify, as one would expect, the rate of payment for this benefit and the period of payment. It requires the Secretary of State to do that; it is a tidying-up amendment.
Amendments made: 2, in clause 27, page 14, line 13, leave out ‘Regulations are to’ and insert ‘The Secretary of State must by regulations’.
Amendment 3, in clause 27, page 14, line 26, at end insert—
‘“specified territory” means a territory specified in regulations made by the Secretary of State.’.—(Steve Webb.)
I have given the Committee a flavour of the thinking behind these reforms, but I will just run through clause 27.
As we would expect, the trigger for the bereavement support payment is that the person’s spouse or civil partner dies. This does not apply to cohabiting couples, which may be an issue we want to discuss, but in line with current provisions for bereavement benefits this is based on legal marriage and civil partnership. It applies to people who, when they are bereaved, are under state pension age; obviously, there are different arrangements for provision for widows and widowers above state pension age, through the pension system. It is a contributory system and the contribution test is set out in clause 28, so I will not dwell on that now.
Clause 27(2) as now amended requires the Secretary of State to specify what the rate of benefit is and how it long goes on for, which we thought we probably should do. The rates can be different. For example, there could be—as we envisage—an initial rate and a rate per month, and there could be different rates again, as in subsection (4). We envisage higher rates for people entitled to child benefit. So we envisage that the lump sum would be higher for families with children. We do not currently envisage that the periods will vary between families with children and families without children, but we have put that flexibility in.
One of the reasons we have done that is that this package of measures is not about saving money. At the illustrative rates we have provided, it will cost the Exchequer an extra £110 million in the next Parliament, so it does not save money in the next Parliament. However, in the long term, as the grandfathered recipients—for want of a better phrase—of the old benefits gradually come out of the system, the replacement system will, over time, start to save money. Clearly, it would be at the discretion of a future Chancellor and a future Parliament to recycle that money back into the system, for example—as subsection (4)(b) allows—through paying for a longer period or paying more to families with children, or whatever mix a future Government wanted to use.
It is worth saying that it is not self-evident that paying for a longer period is necessarily a good thing. The reason I say that is that if we regard the payment of the lump sum and the 12 monthly instalments as being essentially a death grant, that is potentially advantageous to the recipient in two ways. The first is from the point of view of taxation. We have already specified that the lump sum will be tax-free and we are in discussions with our colleagues at the Treasury about the monthly payments, but our impact assessment assumes that they will be tax-free. Secondly, these amounts are disregarded for other benefits, such as universal credit. So, for as long as it looks like a death grant and quacks like a death grant, as it were, we can treat it in that way. If the power in subsection (4)(b) were used to make it into a two-year or a three-year payment, it would be much harder to say, “Well, you can’t tax it because it would look like a bereavement pension”, or that it could not be counted for the purposes of the universal credit. So, having a focused payment means that it is far easier to treat it in a relatively favourable way. I am simply explaining the situation; but we have left that option open.
I have mentioned the issue of not getting payment after pensionable age, and that these benefits do not apply if the death did not occur before this provision has come into force. Although we have not finalised our view, because single tier has come forward to 2016, our best estimate is that 2017 is the most likely start date for these provisions. In clause 27(7), we define what we mean by “pensionable age”.
The key principle behind these reforms is not to spend less money—more money will actually be spent in the next Parliament—but to try to reflect modern circumstances. The type of support someone needs 10 years after they are bereaved might be very different from the support they need immediately after bereavement. We see universal credit as the longer-term method of supporting any family—with adults and/or children—who are on a low income, and focusing our support for bereavement at the time of bereavement and the 12 months immediately afterward.
The Minister says that the changes are supposed to reflect modern life. However, families with parents who have decided not to marry but to cohabit are excluded. In most other comparable areas of the law, those couples are now included. Why have they not been included in this legislation?
The national insurance system, of which the payment is a part, has always been and remains based on legal marriage and, subsequently, civil partnership. The provisions in the single-tier pension for partners are for married partners and civil partners. All national insurance benefits, to the extent that marriage is relevant, are based on marriage, not cohabitation.
I entirely take the hon. Lady’s point that cohabitation is a part of modern society. She asked why we have not reflected that in the provisions. One of the biggest challenges is entirely practical. The payment is not a means-tested benefit, but when we assess a couple for means-tested benefits, defining cohabitation is a messy business. People argue about it; they go to appeal tribunals about it; and they say, “No, we are not cohabiting because I spend only one night a week there.” Sometimes we even have fraud inspectors going into people’s houses and sitting outside in cars, watching what goes on. Cohabitation is not a straightforward concept when trying to the write the law of the land.
It is difficult enough when the two parties are still alive. Imagine a situation where someone has died and someone else comes along and says, “I was the cohabiting partner of the person who has died. I would like a bereavement support payment.” We would need some evidence of that. We do not have a marriage certificate to prove it, so the question is, what would be the nature of the proof we would seek? Would we pry, at a time of bereavement, into the nature of the relationship? Would we ask how long they had lived together or whether they slept together? Would we ask whether they were the only partner? What we have found in other spheres of life is that there could be multiple people who could legitimately claim to be the partner of the deceased. Trying to ask all those questions is difficult at the best of times; at a time of bereavement, it is all the more difficult.
Clearly, an option is for a cohabiting couple to marry, after which they become entitled to all those things. Who knows whether a future Government will allow civil partnerships for heterosexual couples? In that environment, that might well be the way to deal with the point that the hon. Lady raised. I could go on at much greater length. The more we think about how we might do it, the more intrusive and difficult it looks.
I fully accept all the Minister’s points, but I am thinking about the children of those relationships. Might a way around the difficulties of judging whether a couple is cohabiting be to attach the support payment to the child? It does not matter whether the parents are together; even if the living parent was not living with the child, they would still be financially responsible for that child.
Speaking as the Minister who is also responsible for the Child Support Agency, if the deceased is a man, he could have had children by a number of different partners. That could trigger bereavement support payments to each child by each parent; suddenly there are multiple payments of £5,000, and ongoing monthly payments, when someone had paid 25 weeks of national insurance. We absolutely have to support orphans and children, but it is odd, if a man dies, for the state suddenly to say, “We are going to make a payment to a child, fathered by that man, wgi has been living with their mother” when there had been no contact for perhaps 15 years. It is hard to understand that logic.
The hon. Lady’s example is a creative one, but it shows just how difficult it would be to implement the policy. If parents are worried about what would happen to their children after one of them dies, they can have a civil marriage. That is an option. Potentially they can take insurance out. In time to come, my guess—this is not Government policy—would be that we will have a system of civil partnerships, which will probably deal with that problem. One might think that one knows it when one sees it, as it were, but the law has to cover all circumstances. It has to have a standard of proof, and I think we would be asking intrusive questions at a difficult time.
The Minister says that universal credit is the solution for people after a certain period. The problem with universal credit in many cases is the conditionality, unless the children are very young. That conditionality is increasingly demanding, and a number of people have suggested that that will be exceptionally difficult when a family are coming to terms with a loss, and when others things are going on in the children’s lives as well. A longer period—not necessarily for ever—would be advantageous. The analogy has been drawn with the arrangements allowed for kinship carers. When we raised this matter previously, the Minister suggested that jobcentres could have discretion to give a longer period, but the Government are bearing down on conditionality.
The hon. Lady makes a fair point. It is worth saying that conditionality comes in six months after the universal credit claim starts, but someone will get a lump sum of £5,000 or so and a monthly pension. If they are in a position to do so, there may be some other occupational pension or a small amount of earnings that means that, in many cases, they can delay the start of the universal credit claim for as long as they like—for example, for a year. They could take the lump sum, the pension and any other income they have and not even initiate a universal credit claim for 12 months. Six months after that is when conditionality would start in earnest, so we are talking about 18 months.
I stress that the Government are absolutely not saying after 12 months, “Pull yourself together.” We are saying, “We want to help bereaved families at the time of bereavement and in the immediate aftermath in an intensive way, and then give ongoing long-term support to bereaved families through universal credit.” As I said when I gave oral evidence last week, we have plenty of time to liaise with and give guidance to our colleagues in Jobcentre Plus. There are already, for example, exemptions to conditionality for people who are vulnerable in various ways.
To put the other side, there is also evidence that many bereaved parents go back to work. If they were in work when they were bereaved, it would be unusual for an employer to give them more than three months’ compassionate leave. Bereaved parents who are in work are generally back in work quite soon. Those who are not may find that a prolonged period out of the labour market is not in their long-term interest.
We are absolutely not trying to hit people with a big stick when they are vulnerable; we are trying to get alongside them and support them, so that, as and when they are able to re-engage with the labour market, they have not suffered from being detached from it for so long that they cannot do so, leading to them and their children suffering all the more.
In practical terms, although a lot of bereaved parents will go back to work if they are already in work, many couples’ working arrangements work because there are two of them. It is often at a time like this that a parent—whether a man or a woman—has to give up their job because it is no longer feasible in their new circumstances.
I am not quite sure whether I follow the hon. Lady. I take her point that working arrangements that work when there are two people have to be rethought when there is one person, but while conditionality sounds like a big scary word, it is not. For example, it might mean having a work-focused interview and a conversation to get someone to think about what it would take to get them back to work, when the time is right. It might be about whether they have child benefit in place, for example. The system will be progressive as the children get older and go to primary school; there is the provision that we have for three and four-year-olds. We are trying to go with the grain and not be coercive, because that is not where we are coming from. Yes, universal credit has responsibilities attached to it, but we understand the needs of this particular group.
Is the Minister suggesting that there will be special guidance on conditionality for this group? One of the issues around single parents is that some of the single-parent flexibilities that existed no longer exist under the new universal credit regulations. That has already given rise to concerns among groups representing single parents. The Minister may say that conditionality will be flexible, but there is concern about whether that will be written down somewhere where people can refer to it.
The hon. Lady knows her way round the system well, and she knows that we give extensive guidance to our front-line staff. It seems entirely appropriate that we would do so in this case. We are working through these matters as the systems are developed. The measures will not come into effect until 2017, so we have plenty of time to think through the practicalities.
The basic idea behind clause 27 is to focus support on that moment of greatest and most immediate need, when there is the cost of the funeral and all that kind of thing, and spread some of the lump sum over the year, because that is what we have been advised that people wanted. I stress that a lot of these reforms are in response to consultation. We did not sit there at the famous whiteboard and draw them up; we talked to a lot of organisations. I am grateful to the bereavement organisations that gave oral evidence. I had a conversation with them this morning to hear more of their concerns and to discuss some of these issues.
The conversation is ongoing, and we remain happy to have it, but I hope that the House will accept the basic principle of what we are trying to do. There are unfortunate exceptions in the current system, which was built around a very old-fashioned model of the way in which women in particular engaged with the labour market. However, our sense is that clause 27 is a better fit that will hopefully support the needs of bereaved families more effectively.
Has my hon. Friend received any kind of communication from any of the armed forces charities, such as the Royal British Legion, and what did they say?
As my noble Friend Lord Freud leads on such matters for the Department, that would generally be a matter for him. However, arrangements for forces widows, for example, are often made not just through the national insurance system, which is what we are talking about, but through war widows’ pensions and armed forces pensions, which are unaffected by these changes. Very often, a major part of the support that my hon. Friend’s constituents would have would be through mechanisms that are not being changed. However, if we have had further representations, I am happy to share them with him, assuming that they are in the public domain.
I hope that hon. Members understand the spirit in which we are introducing clause 27 and commend it to the Committee.
The Minister refers to the spirit in which the clause is being introduced. No doubt that spirit is positive, but it is worth reminding ourselves of the evidence from the Childhood Bereavement Network and Cruse Bereavement Care, both of which gave evidence to the Committee last week. The Minister referred to conversations that he has recently had with bereavement organisations. Is it his view that the organisations that gave evidence last week support the measures in clause 27?
If we look back at last week’s exchange, it was quite obvious that there was a difference of opinion between the Minister and those charities and voluntary organisations. The first thing that Debbie Kerslake from Cruse Bereavement Care said was:
“One of the big concerns is that the period is being shortened, and that will be particularly seriously negative for those with younger children. For example, those who at the moment would be able to receive benefits until the child was no longer eligible for child benefit would be getting benefits for only 12 months.”
In other words, they would get the larger lump sum and then a monthly sum of around £400. According to Cruse—and it should know—that is
“a drastic reduction in the length of time over which families are supported, and we are concerned because we believe that more than 90% of families with dependent children will lose out under the proposals.”
The Minister intervened and said:
“Obviously, the figures are not in the Bill; it is the structure that we are debating.
We do not recognise the 90% figure that you give, on the basis that if someone gets £5,000 not £2,000, that is an extra £3,000. If they get £400 per month for a year, which is roughly similar to the current rate, the extra £3,000 is gain, and therefore the only bereaved families with children who will get less will be those who would otherwise have been on the benefit for several years and, as you rightly say, this is focused on the immediate bereavement.”––[Official Report, Pensions Public Bill Committee, 25 June 2013; c. 26, Q56-57.]
I understand the point Cruse Bereavement Care and the Childhood Bereavement Network are making. Someone who claims this support for more than two years—I think that was the break even point—will lose out under these proposals. That is a serious matter worthy of consideration by the Minister. I take his point about responding to modern conditions. That is a theme of the Bill generally. But I would be interested to know whether there have been follow-up discussions with Cruse Bereavement Care and the Childhood Bereavement Network. Do they support these changes? It is pretty stark in the evidence. They say that 90% of current claimants would lose out under the new system.
Di Stubbs from the Childhood Bereavement Network said:
“We are very aware of the increase in funeral costs and things like that.”
It welcomes the lump sum. As far as I can see it does not see the lump sum increase in itself as a problem. But there really is an important point. My hon. Friend the Member for Edinburgh East, who is no longer in her place, made the point about universal credit. Di Stubbs pointed out to the Minister that three fifths of people currently receiving bereavement payments are in work. They are not claiming any other benefit. Di Stubbs suggested that adding the payments to universal credit—we take the Government’s word that universal credit will work efficiently from the start—would complicate the system for those claiming this support and who are entitled to this support. Yet the Minister’s aim is to simplify the system. There is a tension there too.
The Minister pre-empted a question I was going to ask. I wanted to ask about the cost of this new system. He said that it is projected to cost the Government, whichever Government it may be in the next Parliament, £110 million more. I take that to mean over the course of the next Parliament. After that this new system will produce savings. The Government should consider carefully the case made by Cruse Bereavement Care and the Childhood Bereavement Network regarding these changes. We can hardly think of a worse time in anyone’s life, I imagine, than a close bereavement. I have not experienced it myself. Inevitably in life it comes one way or another. That is the time when people are in difficult and vulnerable situations.
The Minister has said that that immediate period is very important and so in that immediate period of loss let us move the money around, save a bit of money in the long term and put more of it upfront. I can only refer him to what Cruse Bereavement Care and the Childhood Bereavement Network said on this issue. Di Stubbs said,
“That means that people whose child was 15 or 16, or 17 or 18 if they were in work, are the only ones who would gain under that system.”––[Official Report, Pensions Public Bill Committee, 25 June 2013; c. 27, Q57.]
They made a number of points about the moment at which a bereavement takes place. That immediate period is very difficult; it can be chaotic. I clearly remember Di Stubbs making the point that if someone has been bereaved, there is a sense that the bereavement payment paid over time until child benefit eligibility is exhausted, is something that they feel that their deceased husband, wife or partner has paid for. It is something that they continue to provide after they have gone. I am not as convinced by the Minister’s explanation as I have been during other parts of the Bill and I urge him to continue to examine matter closely, because last week’s evidence was pretty striking. The Minister refuted the 90% figure and I hope that he refers to it in his response if it is wrong and can tell us by how much and why. Cruse Bereavement Care and the Childhood Bereavement Network were keen that some amendments be tabled to probe aspects of the clause. We did not manage to get the amendments down in time, but they are the experts and struck me as reasonable and informed witnesses. There may be a dispute about the calculations about losers, but it seems clear that people claiming the support for more than three years will receive less under the new system than they would from the current. Given that we are discussing the bereaved, I urge the Minister carefully to look again at the clause and its impact. What does he understand to be the position of Cruse Bereavement Care and the Childhood Bereavement Network?
The hon. Gentleman raises some important points in a measured and fair way. Stakeholders have obviously had the opportunity to put their position into their own words, so I will not put words into their mouths, but we did consult on the general principle of moving to a lump sum or a lump sum with monthly payments as against a pension. Cruse Bereavement Care said:
“It is a simple system that would provide bereaved people with access to immediate help. It gives immediate financial support at a time when other available resources can be rendered inaccessible (e.g. frozen accounts).”
It also said:
“A quick, simple initial payment would be a meaningful help for most widows/widowers regardless of family and financial position.”
On universal credit, it said:
“If the principle is that the Universal Credit should ensure that the bereaved family are adequately supported on an on-going basis then a lump sum to help enable them to get back on their feet may be simpler and more appropriate.”
I can offer the hon. Gentleman some assurance that we did not just decide what to do and ignore these organisations. There has been quite a lot of dialogue and, as he will see, they have been quite supportive of important strands of what we are trying to do. It is clear, for example, that they would like the period to be more than 12 months and, as the hon. Member for Airdrie and Shotts suggested, they would like co-habiting couples to be included. I do not think it is any state secret that I have seen the amendments that would have been tabled had they been submitted in time and they include many of the issues referred to by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East. I therefore would not pretend that the organisations would not want to amend what we are doing, but there is a lot of sympathy with the general emphasis of trying to help people more up front.
I will now respond to some of the other points raised by the hon. Gentleman. The 90% figure is based on a misunderstanding. It was based on the assumption that the only basis on which people flow off benefits for widowed parents is when the kids turn 18. Actually, people flow off widowed parent’s allowance when they remarry or when they reach state pension age, for example. In fact, the typical length of time that people spend on widowed parent’s allowance is currently in the order of four years. Although there may be extreme cases of people who are on it for 18 years, or whatever, they are very much the exception. It is more normal to think of people being on such benefits for a median period in the order of four years.
Clearly, if someone is on the benefit for four years, they will get less money through the new system than through the old one. I am not hiding that from the Committee. We have published our estimates of the numbers on the Department’s website. For the reform as a whole, we think it is roughly 50:50. With the figures that we have used, we think that 52% would get more and 48% would get less. There is a shift in the balance, however, because the reform spends extra money on childless bereaved people, who currently would not get any benefit at all in many cases. We estimate that around three quarters of bereaved families with children would get less and a quarter would get more. Within that, however, it is loaded towards those who are out of work, so the heavier losers are those who are in work. We are saying in a sense that we will front-load the money—I do not pretend that any of this is attractive; no one would want to be in this position. A working bereaved parent will get a front-loaded enhanced lump sum, 12 monthly payments and then continue their job, whatever they were doing. If it was a decent job, paying a decent wage, they would be beyond the scope of universal credit—one would have to be on a decent wage to be beyond the scope of universal credit—and that would continue. The Committee will make a judgment on that balance, but that is where in particular what are called the “notional losers” come from. One hundred percent of those who currently receive the least—the bereavement payment group who currently get the lump sum, but no regular payment—are gainers, because they get no pension at all at the moment and we will bring them into the system. I do not recognise the 90% figure.
My hon. Friend the Member for Plymouth, Sutton and Devonport asked about the Royal British Legion. I am pleased to assure him that it responded to the consultation we undertook. In that consultation, we set out two options: one was a very large lump sum and the second was the model in the Bill—a lump sum with 12 monthly payments. The Royal British Legion was in favour of the option we adopted. Within the context of the question we asked in the consultation, which suggested two options—I do not want to misrepresent its views—it favoured the option we have adopted. I hope that offers him some reassurance. War pensions and the armed forces compensation scheme are unaffected by the measures.
I hope my response has been helpful and I have been able to address the points raised. The exact figures will be a matter for a future Government; we are not setting them in the Bill. If a future Government felt that the balance between families with children and those without was not right, for example, they could tilt that balance. If they wanted to use the money that starts to be freed up towards the end of the Parliament, which will be tens of millions by the end of the Parliament in any given year—not vast sums—they could reinvest it over a longer period, which is allowed under clause 27, or in higher rates. That is at the discretion of a future Government. I simply want to stress that, assuming the measures are implemented, we will be spending more money to support bereaved families in the next Parliament than we would have under the current system.