Welfare Reform

Oral Answers to Questions — Electoral Commission Committee – in the House of Commons at 3:34 pm on 5th March 2007.

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Photo of David Laws David Laws Shadow Secretary of State for Work and Pensions 3:34 pm, 5th March 2007

Urgent Question) To ask the Secretary of State for Work and Pensions if he will make a statement on Government plans for welfare reform following today's report by David Freud.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

In December, I commissioned David Freud to conduct a review of progress on welfare reform to analyse the future challenges that we face and to make recommendations. David Freud has published his report today. Copies are available to right hon. and hon. Members in the Vote Office and on the Department's website.

The report is a substantial contribution to the debate and I should like to put on record on behalf of the Government and, I hope, the House, my thanks to David Freud for his work. Freud concluded that we have made strong progress on welfare reform in the past 10 years. Nearly 1 million fewer people are on benefits, 2.5 million more people are in work, 300,000 more lone parents are in work and the numbers of those on incapacity benefit are falling for the first time. Freud concluded that, by any measure, the Government's programme of welfare reform has been a success.

Freud's view is that welfare policy now needs to focus on those furthest away from the labour market, especially those on incapacity benefit and lone parents, and that the new focus should be on job retention as well as placement. Progress on all those matters will be essential if we are to fulfil our aspiration of an 80 per cent. employment rate and of eliminating child poverty by 2020, thus ensuring not only a strong economy but a strong society.

David Freud has made four principal recommendations. First, in recognising the success of Jobcentre Plus in helping people get back to work quickly, he believes that we should maintain it at the core of the system, but focus it on helping those who are unemployed for short periods, potentially expanding the approach over time so that it provides a one-stop front end for all benefits.

Secondly, Freud recommends that, once claimants have been supported by Jobcentre Plus for a period of time, back-to-work support should be provided through outcome-based, contracted support, drawing on the innovation of specialist providers from the private and voluntary sectors. The contracting regime would set a core standard that everyone would receive, but beyond that there would be freedom for providers and individuals to do what works for them, rolling up the existing patchwork of public, private and voluntary provision in favour of a more flexible approach focused on the specific barriers that face individuals rather than the specific benefits that they currently claim.

Freud suggests that payments to providers could be made over a three-year period from when an individual client moved into work, with contracts offering rewards that are proportionate to the value to society and the taxpayer of moving that person into work. That approach would work as a public-private partnership to deliver up-front investment to realise savings over the life of the contract. Payments would create incentives to develop programmes across the spectrum of clients to avoid cherry-picking the easiest clients to help.

Thirdly, in return for offering that help, Freud proposes that we should expect work-related activity from those on benefit. The report suggests introducing stronger conditionality in line with the jobseeker's allowance for lone parents with the youngest child aged 12, and, as wrap-around child care becomes more widely available from 2010, to consider whether further reductions would be desirable. He also recommends—over time and as further help and support becomes available—extending the requirement to undertake work-related activity to those already on incapacity benefits who migrate to the new employment and support allowance.

Finally, citing international evidence that complexity in the benefits system can act as a disincentive to entering work, today's report recommends that we should consider in detail the potential for greater simplification of the benefits system, moving towards a single system or, ideally, a single benefit.

The recommendations represent the opportunity for a step change in the nature of our welfare system in the United Kingdom. The publication of today's report marks the start of the debate, not its conclusion. The Government will consider the proposals carefully and come back to the House with a fuller response later this year.

Photo of David Laws David Laws Shadow Secretary of State for Work and Pensions

I thank the Secretary of State for his statement. However, given the importance of the report, I am surprised that he did not make it voluntarily but came here under sanction.

Does the Secretary of State agree that David Freud has done an excellent job in nine weeks in reviewing some of the challenges in the benefits system? Will he accept our support for a large part of the Freud proposals? However, does he agree that it is odd to produce such a set of proposals in the middle of the passage of the Government's Welfare Reform Bill? Do not the proposals make the Bill appear rather feeble? Would it be sensible to have a pause after the Lords stage of the measure to consider—on a cross-party basis if necessary—whether any of the proposals in the Freud report should be introduced early into legislation rather than waiting for the next welfare reform Bill? In that regard, will he also comment on some of the inconsistencies between the existing Bill and the Freud proposals, which will be debated in the House of Lords in the next few weeks?

Does he agree with David Freud that Jobcentre Plus, rather than the private sector, should have the sanctioning power in relation to benefits? If he does, will he agree to amend the Welfare Reform Bill, under which the private sector could have those sanctioning powers?

Does the Secretary of State agree with David Freud that "intensive, individualised support" for the hard-to-reach groups is very expensive? Freud has come up with some interesting ways of funding that, but does the Secretary of State feel confident that there is in his Department, in the Department for Education and Skills and in the Department of Health, the other financial resources necessary to support David Freud's ambitious plans?

Does the Secretary of State agree with the Freud proposal, which seems extremely sensible, that Jobcentre Plus should become a one-stop shop not only for the existing benefits, but for tax credits, housing benefit and council tax benefit? On prime contractors, is the Secretary of State minded to accept Freud's recommendations on regional monopolies or does he want more choice in the system?

On lone parents, we welcome Freud's measured proposals to move this country closer to the benefit rules that we see in most of the rest of the developed world. However, does the Secretary of State see the need to take any action on child care availability and for those lone parents with disabled children to avoid some problems that could otherwise arise?

We think that the report from David Freud is important, which is why we are surprised that the Secretary of State did not want to trumpet it himself. We hope that Freud's proposals will be taken further, and we note that, in nine weeks, he seems to have made more radical and ambitious welfare reform proposals than the Government have managed in the past nine years.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

May I deal first with the hon. Gentleman's point about the nature of today's announcement? Back in December, we asked David Freud to do a piece of work and he produced his report today. It was very much his desire to get the report out today, of course, and we wanted to reflect that. That is why we made the announcement today. There was no manoeuvring or complicated announcement.

As to why I did not make a statement, the record will show that I have made a great many statements in the last few months, so there is no discourtesy, by any means, intended to the House. Far from it. We made a written statement today, and I felt—obviously wrongly—that that would be adequate. I am happy to expand on our thinking today.

On the four or five specific points that the hon. Gentleman made, I should point out that David Freud has expressed his strong support for the Welfare Reform Bill and the establishment of the new employment and support allowance. If we were minded to take up the changes that he proposes in relation to conditionality for ESA, I understand that further primary legislation would not be required.

On the provisions in the Welfare Reform Bill that would allow private contractors to carry out some of the benefit sanctions, we have always made it clear—my hon. Friend the Minister for Employment and Welfare Reform in particular has done so—that we intended in any event to pilot those arrangements before deciding how best to proceed. That remains our view.

The hon. Gentleman asked about the capabilities of the Department for Work and Pensions. I accept that it needs to improve its ability to manage contracts if we are to deliver the new model that David Freud has proposed. We will obviously need to reflect carefully on that. On regional contracts, which are a reasonable concern for the hon. Gentleman to raise, Freud himself has recognised that there might be circumstances in which we might not need to go down the path of creating those large regional monopolies. Again, that is an issue that we need to reflect on.

On the hon. Gentleman's last point, which was probably the most important, if we are to go down the path of expecting more from lone parents in return for the additional help that we intend to make available through these proposals, Freud has made it clear that we should not do that, and that it would be wrong to do it, unless we are quite sure that we have overcome the barriers that stop lone parents working and that we will not put lone parents in the untenable and unfair position of being asked to take up work when the impact on their families would be serious and retrograde.

We must match the increased obligations with the increased provision of child care. That is Government policy; that is how I think we should proceed.

Photo of Terry Rooney Terry Rooney Labour, Bradford North

My right hon. Friend will recognise much of what David Freud has put in his report from the excellent Select Committee on Work and Pensions report published two weeks ago, and we look forward to the Government response to it.

May I raise two issues? The first is the notion of three years' benefit rolled up into a package. That is too long by one year. Will my right hon. Friend comment on that? Secondly, the particular issues as regards London and single parents and child care tend to get glossed over in David Freud's report, but there are particular pertinent factors in London. Does my right hon. Friend have any comment on that?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I certainly acknowledge my hon. Friend's first point: the Select Committee recently produced an excellent report on how we might make progress on reaching our aspiration of an 80 per cent. employment target. We will respond fully to that report in due course.

With regard to the three-year proposal, we will have to study the Freud report carefully. Were the arrangement to work, however, it would allow us to make real progress in achieving one very important thing: ensuring that we do not just succeed in finding a job for someone but that we focus in future on helping them to stay in the job. In that regard, the difference is between a job and a career. Increasingly, Jobcentre Plus must focus on that. A three-year period would be challenging, and we will have to study the proposal carefully.

I agree that there are specific problems in London in relation to making work pay for people on benefits, especially for those in the social rented sector with large families. That issue is being considered separately by the Minister for Employment and Welfare Reform, as part of our refreshed child poverty strategy. We hope to make announcements on that shortly.

Photo of Michael Howard Michael Howard Conservative, Folkestone and Hythe

I, too, hope that the Secretary of State will implement the proposals in the Freud report, but why did he find it necessary to commission it? Why did he not simply adopt the similar proposals set out in the James review and put forward by the Conservative party at the last general election? Unfortunately, his predecessor, now the Education Secretary, described those proposals as "dangerous", and said that they would mean

"massive cuts in front-line services and less help to get people into work".

Will he now apologise for his predecessor's inexcusable scaremongering in respect of what he now acknowledges to be perfectly sensible proposals?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

The right hon. and learned Gentleman wants to re-fight the last general election, and we are certainly keen to re-fight that one with him if he would like that to be arranged. Freud's proposals bear no resemblance to those in the James report, and the view taken at that time was right. I hope that, as the right hon. and learned Gentleman said, he will support us in taking Freud forward.

Photo of Philip Hammond Philip Hammond Shadow Secretary of State for Work and Pensions

We welcome many of the report's recommendations, and join the Secretary of State in thanking David Freud.

The report identifies and seeks to address some of the principal weaknesses in the new deal approach: the revolving doors effect; the excessive focus on placing people in work, as the Secretary of State has just said, rather than encouraging them to stay in work; and the inability to extend the reach of some of those programmes into the existing stock of long-term benefit claimants.

The focus on transferring risk to the private and voluntary sector and incentivising longer-term support reflects much of the Opposition's thinking and some ideas that we have put to Ministers during the progress of the Welfare Reform Bill. We therefore welcome the thrust of the proposals. As a result of the work that we have been doing, one or two questions arise immediately, and I want to put those to the Secretary of State.

It does not seem easy to reconcile the suggested approach of sending all new claimants through Jobcentre Plus for a year with the now fairly well-established principle that early intervention is the key to placing more difficult-to-place candidates. Does he think that those who have, for example, a history of health problems, or a broken work record, should be referred immediately to the more intensive form of support that Freud recommends? Can the Secretary of State reassure many of the smaller players in the private and voluntary sector that the regional lead-contractor model will not squeeze out the little platoons that are so important if we are to have a community-based solution to this problem? Does he envisage the reforms being implemented against a backdrop of benefit and tax credit changes that will reinforce the incentives for people to work and for families to stay together?

The Government have been in office for 10 years. Will the Secretary of State make an early start on the agenda by confirming that, in line with Freud's recommendations, the roll-out of pathways to work will now be implemented as a 100 per cent. private and voluntary sector programme?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I am grateful to the hon. Gentleman for much of what he has said, although I think he is wrong to suggest that the report implies that the new deal has failed. I know that that is his view, but David Freud said of the new deal programmes:

"By any measure, these programmes have been a success."

It is worth reminding ourselves that 1.7 million people have been helped into work through the new deal, including 480,000 lone parents. It is clear that that programme in particular has more than paid for itself.

I hope that the hon. Gentleman will drop his ideological opposition to the new deal, because it is not helpful.

I agree with one thing that the hon. Gentleman said. It is explicit in David Freud's report that if we are to tackle some of the deep-seated problems, the benefits system should provide more individualised and tailored support services for the long-term unemployed, whether they are on income support, incapacity benefit or jobseeker's allowance. We should, for instance, aim for better screening at the point at which a claim is made, especially in the case of repeat JSA claimants. David Freud recognised the importance of that.

I strongly agree with what the hon. Gentleman said about the role of specialists and smaller providers. We must ensure that they have an opportunity to be part of the new landscape.

As the hon. Gentleman will know, tax credits are a matter for my right hon. Friend the Chancellor of the Exchequer.

Photo of Frank Field Frank Field Labour, Birkenhead

Given that the number of jobs has increased by 2.5 million since 1997, does the Secretary of State accept that the reduction in the number of people on welfare has been modest? Is he aware of the changes that have occurred in America, which has experienced a similarly strong job growth? President Clinton increased the availability of child care and the value of working tax credits while time-limiting benefits. David Freud reported on the Secretary of State's brief in record time; will the Secretary of State give him this brief on which to report next?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I do not think we should lose sight of what the Organisation for Economic Co-operation and Development has said about welfare reform in the United Kingdom. It has described our progress in the last 10 years as outstanding, and a worldwide example of good practice. As for my right hon. Friend's point about time-limited benefits, I have told him on previous occasions that we are not minded to take that route, and David Freud did not include it in his recommendations for the future. Jobseeker's allowance is a time-limited benefit, however, and in that context the appropriateness and success of the approach have been confirmed.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

In view of the report's welcome emphasis on flexibility in job search, will the Secretary of State consider some of the inflexible and rigid practices of Jobcentre Plus, such as the requirement to attend one-size-fits-all training courses that are often inappropriate and may often involve abandoning job interviews and part-time work search?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We will certainly do that. David Freud clearly stated that we should provide a more flexible, individually tailored support system. If the hon. Gentleman has any specific examples of what he has described, I should be grateful if he brought them to my attention.

Photo of Kali Mountford Kali Mountford PPS (Rt Hon Des Browne, Secretary of State), Ministry of Defence

May I take up the flexibility theme? The longer people are away from the labour market, the more difficult it is for them to return to work when the time is right. May we see cross-Government consideration of how we can keep, for instance, single parents or people who become sick or disabled more closely in contact with the labour market through training or part-time work?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

I strongly agree with my hon. Friend. If we are to achieve everything to which we aspire, a cross-Government response will be required. The Departments of my right hon. Friends the Secretaries of State for Health and for Education and Skills will have a particularly important role to play. The Chancellor of the Exchequer commissioned the Leitch report, which appeared during the past few weeks and which made a number of important recommendations about skills. We must take account of all the issues, but that, I think, is the best way of ensuring that we can sustain the progress that we want to make.

Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

I, too, welcome the Freud report. How soon does the Secretary of State think he will be able to return to the House with legislative proposals to give effect to its conclusions? When he does so, will he pay particular attention to the report's comments about the complexity of the current benefits system, and negotiate with his right hon. Friend the Chancellor with a view to minimising that complexity so that people know that it is worthwhile to go out to work?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We will make a further announcement later this year. Freud has recognised that benefit simplification is a substantial and long-term challenge, and the Department will be involved in a significant amount of work on that. After 70 or 80 years of having the welfare state we have arrived at a certain point in respect of it, and no one is suggesting that there is a magic wand that can be waved over the system to make it as we would like it now. That will take a lot of work.

In relation to Freud's recommendations about employment and support allowance, we will not need primary legislation, but the hon. Lady is right that if there are any further substantive proposals on benefit simplification, that will require primary legislation. However, I cannot give her a timetable for that.

Photo of Joan Humble Joan Humble Labour, Blackpool North and Fleetwood

I welcome the acknowledgement of David Freud—and of my right hon. Friend today—of the importance of affordable and accessible child care. Will he therefore liaise with colleagues in the Department for Education and Skills to look at two special areas where there are particular problems for lone parents: child care that is appropriate for children with disability, and child care for older children in the 10 to 14 age range for whom parents often have great problems in obtaining suitable care?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

We will certainly pay particular attention to those problems, and I appreciate the work that my hon. Friend has done as a member of the Select Committee on Work and Pensions on all such issues. In relation to the suggestion in Freud's report about additional requirements expected from lone parents, it is important that we are clear that we will set those as and when barriers can be removed that prevent lone parents from working in the current circumstances. The approach, which is not punitive but enabling, is fully consistent with the approach that we have taken in relation to the new deal, for example. In return for additional help and support—that is now the promise on offer—we expect lone parents to engage with us and to plan a more rapid return to work. Work is good for their health and for the general well-being of their families. We in this House have an overall responsibility to do all that we possibly can to help lone parents back into work.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The Secretary of State said that the report was published today, that the debate would start today and that he had made a written statement today. I cannot, however, find that written statement listed on the Order Paper. The Secretary of State also knows that the debate started yesterday—all the media were aware of the report yesterday; it was covered by all the networks. Why were Members of Parliament the last to know, as usual?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

The hon. Gentleman is right that the debate has been going on for a considerable time. I tabled a written ministerial statement because I felt that that was the right way to inform the House about what was going on. However, in relation to the urgent question, we felt that it was more appropriate to come before the House. I have tried to make it clear that there was no suggestion of any discourtesy to Members, and I am happy to make that clear again now.

Photo of Gordon Prentice Gordon Prentice Labour, Pendle

How many civil servants at Jobcentre Plus are likely to be affected by the proposals, and will they be expected, or encouraged, to move across to the new providers?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

There are no specific proposals yet, but the Freud report clearly suggests that, there will be an important and central role for Jobcentre Plus.

Photo of Jeremy Hunt Jeremy Hunt Shadow Minister (Work and Pensions)

The Freud report talked about simplifying the massive complexity of the benefit system. Does the Secretary of State agree that one of the most pernicious examples of that complexity is the variation in the earnings disregard? It can be just £5 a week for someone on income support, rising to £10 or £20 a week after a year, but it is £84 a week for someone on incapacity benefit, on a contributory basis. Therefore, the poorest people are the most disincentivised by the earnings disregard from looking for work. Will the Secretary of State look into simplifying the earnings disregard system across the range of benefits so that everyone knows exactly where they stand and no one is disincentivised from looking for work?

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

My hon. Friend the Minister for Employment and Welfare Reform has already made it clear that that is what we are doing.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

May I raise with my right hon. Friend an issue at the interface between the Freud report and the Lyons report into local government finance? I am sure that my right hon. Friend is aware that low-income families in work with children generally start paying their council tax at a much lower level of pay than they start paying income tax. That is clearly a disincentive to work. I realise that the issue is very complex, but will he at least consider doing something to align the point at which council tax benefit starts being withdrawn with the point at which income tax starts being paid? That would do an awful lot to remove disincentives to work, and to take thousands of children out of poverty at the same time.

Photo of John Hutton John Hutton Secretary of State, Department for Work and Pensions, The Secretary of State for Work and Pensions

Yes, that is a very important issue. In terms of pensioner poverty, there is a clear link between council tax benefit take-up and financial hardship, and we must look at that issue carefully. However, my hon. Friend's specific point is primarily a matter for my right hon. Friend the Secretary of State for Communities and Local Government.

Photo of Philip Hammond Philip Hammond Shadow Secretary of State for Work and Pensions

On a point of order, Mr. Speaker. The Secretary of State has twice told the House that he tabled a written ministerial statement today, but we cannot see reference to it anywhere on today's Order Paper. Could you clarify the situation, Mr. Speaker?

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

I think that the right hon. Gentleman meant that the written statement would be put down today for publication tomorrow.