Universal Credit and Welfare Reform

Opposition Day — [6th Allotted Day] – in the House of Commons at 3:45 pm on 11th September 2012.

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Votes in this debate

  • Division number 62
    A majority of MPs voted against publishing the business case for the “Universal Credit” scheme.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions 3:45 pm, 11th September 2012

I beg to move,

That this House
notes that the Universal Credit is late and over budget;
recognises that there is widespread unease surrounding the implementation of the £2 billion scheme’s IT system;
further notes that the project is so badly designed that it is set to reduce work incentives for over two million people and hurt small businesses and the self-employed;
believes that Ministers have failed to properly account for numerous basic details of how the scheme will work, such as its interaction with free school meals or what is to be done with 20,000 Housing Benefit staff;
further believes that the project is poorly thought through and is now at risk of descending into chaos;
and calls on the Government to publish the business case, so that the House can see a detailed plan of implementation, and urgently to set out a plan to address these deep flaws before it is too late.

At the heart of the debate is a very simple principle, which is that anyone in this country should be better off in work than they are on benefits. That is a principle in which we in the Opposition passionately believe. We are a party that was founded by and for working people and that is why we want universal credit to succeed. It is now, however, an open secret in Whitehall that universal credit is a flagship that is sinking fast. The Treasury, says Mr Nick Robinson of the BBC,

“have long had deep anxieties that” the Secretary of State

“might not be able to control spending” on universal credit. Last week, the Minister for the Cabinet Office and Paymaster General, who is an old friend of the Secretary of State, was asked how universal credit was going. He said:

“Are we there yet? Am I absolutely confident we are there yet?”

His answer? “No.” This morning, an unnamed Minister weighed in to support the Secretary of State in his own way with a ringing endorsement, saying that universal credit

“is another car crash waiting to happen”.

The Secretary of State is no stranger to friendly fire. Indeed, back in 2002, he described himself as the “quiet man” who was about to “turn up the volume”. Today, we are not asking the Secretary of State to turn up the volume. We are asking him to dial down the chaos and dial up the competence in his Department.

The Secretary of State and I share a faith. He, like me, believes that confession is good for the soul, and today is confession time. We need answers to a host of questions about universal credit and we cannot help to get this vital project back on track unless he comes clean about exactly what is going on.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

While we are on a religious theme, I wonder whether the right hon. Gentleman might think about motes and beams, as there is rather a large beam in the eye of those on the Opposition Benches.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

It is unclear how I might respond to that. I hope I will be able to set out for the hon. Gentleman this afternoon what I think will be a shared set of concerns about how to get this vital project back on track. I hope we have a degree of clarity, honesty and openness from those on the Treasury Bench.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

My right hon. Friend is starting at a macro level, but last Friday I had meetings with the people who have to apply the universal credit scheme in Rotherham. I also met the voluntary groups that deal with the people who rely on it and there are genuine fears. People want reform and they are not necessarily anti the Government for political reasons, but they do not think that the scheme will work as it is devised. The computer crashes for which our Governments are so famous—both those of which he was a member and this Government—are a legend in the computer industry.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

Let me start with precisely that risk. We were told when universal credit was first proposed that the IT costs would be in the order of £2 billion. Some £200 million was taken off for subsidies for another problem with child care created by the Secretary of State’s friend, the Chancellor. The former Minister responsible for unemployment, Chris Grayling, before he departed for the Ministry of Justice, said that the cost had spiralled to £2.1 billion. Already, two years in, the project is £100 million over budget and we learned yesterday that universal credit, when it is introduced and fully rolled out in 2017, will demand an extra £3.1 billion in welfare payments each year. That was the figure that the Department for Work and Pensions gave to the Office for Budget Responsibility in July last year.

Yesterday, however, the Secretary of State told the House that he had agreed to a Treasury target of £2.5 billion, wiping £600 million off tax credits by so-called policy designs. Where on earth is that money going to come from? It is, I am afraid, a mystery. It is a mystery shrouded in further questions about whether people will be better off in work when universal credit is introduced. What on earth is going to happen to free school meals, which are worth £410 million a year to families in many of our constituencies and are a vital lifeline every week? The Children’s Society says that if universal credit integrates free school meals in the wrong way, that will wipe out incentives to work for 120,000 families. What is going to happen to that budget?

Then there is the question of council tax benefit, which is worth £5 billion for 6 million households in Britain. As it turns out, we are going to get not a national scheme but a local scheme because the Secretary of State lost his battle with the Secretary of State for Communities and Local Government. He was sat on by Mr Pickles, which is a fate we would not wish on anyone. The result is that whether someone is better off in work or on benefits will depend on where they live. The Institute for Fiscal Studies says that universal credit “severely undermines” the simplification.

Then there is the question of how universal credit will interact with increases in personal allowances, which were introduced with such a great fanfare over the past year or two. Last week, Gingerbread said that because

universal credit is calculated on post- tax income, the lowest paid would see most of the increase in personal allowances wiped out. In fact, when universal credit is introduced, the low paid will lose two thirds of the increase in personal allowances. Somehow the Chancellor of the Exchequer forgot to tell us that when he unveiled the proposal in his last Budget.

Then there is the question of how universal credit will lock in the cuts to tax credits that hit so many of our constituents this April. Those cuts now mean, according to answers given to my hon. Friend Ann Coffey, that a couple with kids working part time—and goodness me, there are more people working part time these days—will now be more than £700 better off on benefits than in work. How on earth can that send the right signal?

Photo of John Redwood John Redwood Conservative, Wokingham

Will the right hon. Gentleman give the House some of his ideas on how we could make it more worth while for people to work, given that all parties in the House think that that is the right aim and that it is not worth while enough at the moment?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

That is very much the point of bringing the debate here today. We need from the Government transparency about the business case, which is being kept secret. Until we get to the heart of how the policy will be rolled out, until we get some answers to these basic questions, it is difficult for us to offer some constructive advice—advice we would offer for free.

Photo of John Healey John Healey Labour, Wentworth and Dearne

Will my right hon. Friend take a look at the Rotherham citizens advice bureau survey, which I have sent to the Secretary of State today? The bureau questioned more than 100 people who had been through employment and support allowance assessments last year; more than half said that the assessment was rushed, nearly two thirds said that the assessor did not listen to them and only a quarter felt that the assessor was fully qualified to assess their medical condition. Does he agree that a fair benefits system and a fair universal credit depend on a fair and accurate system of assessment?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

It absolutely does. Our chief concern is that that open and fair system of assessment will not fall into place for universal credit, with enormous consequences for our constituents.

The final point about the basic principle of whether people will be better off in work or on benefit is the evidence published by the Secretary of State’s own Department in the impact assessment that he signed earlier in the Parliament. The evidence shows that the marginal deduction rates will not go down for many people but will go up—2.1 million people will see their marginal deduction rates go up when universal credit is introduced. The incentive for them to work does not increase with universal credit; it goes into reverse. We have problems with free school meals and with council tax benefit, a short changed personal allowance, the lock-in of cuts to tax credits and a worse incentive to work. That raises fundamental questions about a system that is about to go live in 150 days. That is why in this debate we want some answers on how these problems will be solved.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I will just give the right hon. Gentleman some answers on the marginal deduction rates. The fact is that 1.2 million people will receive a reduced marginal deduction rate as a result of what we are doing with universal credit. At the moment, 500,000 families see marginal deduction rates of well over 80%. Virtually nobody will see that once universal credit comes in. Some 2.8 million households will gain and 80% of those gains will go to the bottom 40%, improving their life chances dramatically.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

But the Secretary of State refuses to admit that the marginal deduction rates will get worse for 2.1 million people. Until he answers the question about what will happen to free school meals and to council tax benefit, he cannot give us the assurance that that number of people will be better off in every single part of this country. He has to come clean about a system that is about to go live in 150 days. He is cutting it too fine, which is why No. 10 is worried, why the Treasury is worried and why his old friend the Minister for the Cabinet Office is worried.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

The fact is that 1.4 million people have been on out-of-work benefits for nine of the past 10 years. Rather than fear-mongering, shroud-waving and trying to frighten people, why is the right hon. Gentleman not working with the Government to get the best result and tell those people, “You’re needed in the workplace. We want you to play a part in building up the economy for future generations”?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

If the hon. Gentleman was serious about wanting to get unemployed people in his constituency back to work—goodness knows there are enough of them—he would support Labour’s proposal for a tax on bankers’ bonuses that would get 110,000 young people back into work over the course of the next year.

Photo of John Denham John Denham Labour, Southampton, Itchen

Those of us who were here when the Child Support Agency was introduced know the dangers of introducing legislation that everyone agrees with in principle but that is badly carried out. My right hon. Friend is doing the right thing by raising these questions, but does he not agree that it is a little odd that it was the Secretary of State who was in danger of being forced out of his job when so many of the problems with the system lie with the Treasury, the Department for Communities and Local Government and the Department for Education, all the bits of the Government that are refusing to play ball with this vision?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

My right hon. Friend is precisely right. That is why we are here to help the Secretary of State this afternoon by setting out some of the questions on which, if he was only a little clearer with the House, we would be happy to engage and help. One of the issues in which we share an interest is the way we support the enterprise spirit in this country. The CBI and the Chartered Institute of Taxation have flagged up their worry that

universal credit will be a car crash for Britain’s entrepreneurs. The number of self-employed people in this country increased by 280,000 over the past couple of years and many people must now look to their own resources for work, but what is being prepared for self-employed people is frankly chaotic.

Photo of Anne Main Anne Main Conservative, St Albans

Will the right hon. Gentleman give way?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

I will in a moment.

We have heard from the Chartered Institute of Taxation that the system proposed for entrepreneurs will require self-employed claimants to report their transactions each month and that they will have only seven days after the end of the month to file them. They will have to put all that information into a great big IT system and calculate their earnings using a system that is different from the one they use to calculate their tax bill. How on earth does the Secretary of State think Britain’s entrepreneurs, who are busy doing other things day to day, will deal with the new system? I thought that the Government were committed to cutting red tape, not swaddling entrepreneurs with it if they want any chance of help with tax credits. Perhaps Mrs Main can explain a way through it.

Photo of Anne Main Anne Main Conservative, St Albans

The right hon. Gentleman should take a little while to consider that not everybody who is self-employed is the entrepreneur he is talking about. The reason that degree of scrutiny is needed is that people who sell The Big Issue for a certain period of time can suddenly declare themselves to be self-employed, so the scrutiny is not something he should want to remove; it is a question of whether it is reasonable. If he wishes to help my right hon. Friend the Secretary of State, he might like to propose a constructive way forward for how we can stop people abusing the system by declaring themselves to be self-employed when all they are doing is a minimal amount.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

Members on both sides of the House want this to work, but if the hon. Lady looks at the evidence submitted by the CBI and the Chartered Institute for Taxation to the Work and Pensions Committee on Friday, she will see that there is now a real worry that this is going to be a catastrophe for the many entrepreneurs who rely on tax credits for help to balance the books at the end of the month. What I want from the Secretary of State is clarity about how this is going to work in practice.

This is the start of a whole series of risks that have been brought to the attention of hon. Members here and in the Select Committee. Flagged up in the evidence submitted on Friday was the decision to deny people a choice about who receives the money. I hope that the Secretary of State will reform this before implementation of universal credit, because many people who run women’s refuges say that the system is so badly thought through that refuges for women fleeing from domestic violence will have to close. In fact, Refuge tells us—[ Interruption. ] This is not scaremongering by me; it is evidence submitted to the Select Committee by Refuge, which says that the idea is so badly thought through that unless changes are made, 297 refuges will have to close. This is not scaremongering; it is bringing to the House’s attention information and arguments provided by one of the most important charities in the country.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Yesterday in oral questions, at which I think the right hon. Gentleman was present, the Secretary of State gave categorical assurances about refuges, so to repeat the smear after receiving those assurances is scaremongering.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

If the Minister is accusing Refuge and Women’s Aid of a smear, I am afraid that he has got his facts seriously wrong. This element was not in the original design. Yesterday we finally extracted from the Secretary of State a commitment to change; now we want to know how it, along with a host of other things, will work in practice.

Some of these issues are now bedevilling local authorities. There is a serious risk that direct payments of universal credit, which includes housing benefit going to the individual, will result in local councils’ arrears bills and eviction rates beginning to rise. We are still no clearer about what will happen to the 20,000 housing benefit staff who work for local councils and will no longer have to process housing benefit claims once the DWP takes over the task. Are they going to be sacked or made redundant? Who will pick up the bill? Is it yet another bill that will fall on the shoulders of hard-pressed council tax payers?

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport), Shadow DUP Spokesperson (Human Rights)

In my constituency, housing benefit applications are up by between 10% and 15% and extra staff have been employed. The waiting list for applications to be processed takes anything from six to eight, or even 10, weeks. Yesterday the manager of the housing benefit office told me that only six months into the scheme he is already cutting back on the moneys that are allocated to try to make them last until next April. Does the right hon. Gentleman think that in the case of housing benefit, chaos is knocking on the door?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

I am afraid that that is absolutely right. That is the message that is coming back from local authorities all over the country. In fact, the Local Government Association told the Select Committee on Friday that there is

“a real risk that the central Government universal credit IT systems will not be ready on time”.

That was part of an array of evidence submitted about the mounting risks. The CBI said that the

“tight delivery timetable…is a risk to business”.

Citizens Advice said that universal credit

“risks causing difficulties to the 8.5 million people who have never used the internet”.

The Chartered Institute of Taxation said that for many people

“The proposed procedures for self-employed claimants…will be impossible to comply with.”

Shelter has said:

“Social landlords and their lenders have voiced considerable concern at the implications of direct payments for social tenants”.

The Association of Directors of Adult Social Services says that the abolition of severe disability premium is an

“apparent contradiction of the Government’s stated aim to protect the most vulnerable.”

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

On direct payments to landlords, last night I met representatives of south-west housing associations, and to a person they all expressed serious concerns about the implications for them, their lenders and their loan books.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

My hon. Friend is absolutely right. Once arrears build up, it becomes far more difficult for social landlords to raise the money they need to build much-needed social housing. These are very serious risks.

Photo of Joan Ruddock Joan Ruddock Labour, Lewisham, Deptford

I am grateful to my right hon. Friend for reciting the concerns of a whole range of people and organisations. One of the things that has surprised me most is that every employer in the country will have to report to Her Majesty’s Revenue and Customs on the circumstances of every employee on a monthly basis and sometimes, perhaps, even on a weekly basis instead of annually. Is this not going to be an incredible burden on British business, which is already in difficulty?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

Exactly—as if British businesses were not struggling enough. The point is that the 500 pages of evidence submitted to the Select Committee on Friday present to the Secretary of State a whole range of issues to which we have received no answers, despite the fact that the system will go live in 150 days. The system is already over budget and late, and I am afraid that we now need some urgent answers from the Secretary of State this afternoon.

Photo of Kate Green Kate Green Shadow Minister (Equalities)

Does my right hon. Friend agree that one of the great concerns of the many agencies that he has mentioned—they are worried about how universal credit will affect the client groups that they work with—is that the funding of those advice agencies that could support individuals is being squeezed and that there will simply be no access to support, either to make applications or to sort out problems when things go wrong?

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

That is a real concern. I know from the fact that a number of advice centres in Birmingham have been forced to close that advice is simply not available for many people in some of the most deprived parts of our country. They are being asked to contend with a new benefit system that is complicated and vital to their living standards, so that is a real worry. I hope that the Secretary of State will take that into account in his response.

I am going to draw my remarks to a close, because I know that many hon. and right hon. Members want to contribute to the debate. All I will say to the Secretary of State is that, following the recent attacks on him by the Treasury, the Cabinet Office and No. 10, he could be forgiven for wanting to retreat to the deepest, darkest bunker in Whitehall. The truth is that his Department is already one of the most secretive in Government. He is refusing to publish information about the Work programme and he has refused Labour’s freedom of information request to release the business case for universal credit.

I know that he does not always see eye to eye with the Minister for the Cabinet Office, but I hope that he will pay heed to his words:

“Transparency is at the heart of our agenda for government…We are unflinching in our belief that data that can be published should be published.”

Unflinching indeed.

Universal credit is a massive project—it is too big to be allowed to fail. We need to make sure that it is on track and I hope that the House will join us in sending an unequivocal message to that effect this afternoon.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions 4:07 pm, 11th September 2012

This debate cannot take place in a vacuum, as Mr Byrne would wish. Let me start by saying that he is wrong: we are not over budget on the programme and we are not out of time. Both are proceeding much according to the plans that we laid. He referred to a report or note that mentioned £3.1 billion. That was considered as a possible end position and the Office for Budget Responsibility, which is independent, looked at it well before Members of both Houses had completed their scrutiny of the legislation. It was done in July of last year. Since then we have had a series of discussions with the OBR. It has looked at the modelling in detail, and continues to do so.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Wait a minute.

As far as the OBR is concerned, we are progressing in the right direction and the modelling seems to be about right. We are committed to the £2.5 billion a year and the £2 billion of investment in our IT programmes.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

I am grateful to the Secretary of State for being characteristically generous in giving way so early in his remarks. Will he explain what policy designs resulted in the £3.1 billion estimate, made by his own Department, dropping down to £2.5 billion? Will he also confirm to the House that everybody affected will be on universal credit by 2017, as initially planned?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

First, I will answer the second question. That is exactly what we intend and we believe that we are on track to do just that. The right hon. Gentleman and the House should realise that this is not, as has been the case with previous IT programmes, a “waterfall” approach whereby everything explodes and is launched on one date, which I think the previous Government used to realise was probably not a good idea. This will be a progression over four years, so that, as we bring in different groups, such as jobseeker’s allowance recipients, and first address the flow, then the stock, and then look at tax credits and how they fit in, we can make sure that we get this absolutely right at every stage. We know that there are important things to consider so that people do not suffer as a result of universal credit. We want to get this right, even as we do it.

We agreed on the £2.5 billion figure. That is our position. As we look at all these things, including the disregards, we see that we can realise better ways of doing them. It is a work in progress. That is how we are able to achieve these things, just as when we looked at them originally.

Stephen Timms has peppered us with freedom of information requests, which is exactly what an Opposition Member should do. However, it does him and the shadow Secretary of State ill to lecture us about releasing business cases. When they developed employment and support allowance, a system about as large and complicated as this one—I think that the right hon. Member for East Ham was a Minister in the Department at the time—at no stage, despite the request, did they ever release their business plan to us.

Photo of Kate Green Kate Green Shadow Minister (Equalities)

I wonder whether the Secretary of State will clarify something that he said in response to my right hon. Friend Mr Byrne. He said that the change would be implemented in stages, with first the flow, then the stock and then tax credits. Surely the tax credits for the first claimants to receive universal credit will have to be brought in on the first day of universal credit.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

No; it has always been part of the process that jobseeker’s allowance will be the first to move across. I am happy to discuss that further. Universal credit will run in parallel with the other systems until we shut them down and move them across. That is the way it will work. That has always been clear. I think that the Chair of the Work and Pensions Committee knows that, because I have been open with her about it from the word go.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I have explained the plan that we have and I want to make some progress, but I will give way.

Photo of John Healey John Healey Labour, Wentworth and Dearne

The Secretary of State maintains that the project is on track, when everybody else seems to think that it is in serious trouble and way off track. Rotherham Jobcentre Plus staff have told me that he has told the public that jobseeker’s allowance and new claims for out-of-work support will be treated as new claims for universal credit from October 2013. Is that still the case?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I thought that I had been pretty clear about that. The plan is that, starting in October 2013, we will move through the different groups of benefits and tax credits progressively over the four years, bringing in different groups at different stages. That is how it will work. We will be giving a big presentation next week for members of the media.

Photo of John Healey John Healey Labour, Wentworth and Dearne

Has the timetable not slipped?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

The timetable is not slipping at all. We are on target. The right hon. Gentleman needs to be happy about that.

It is all very well for the Opposition to carp, while saying that they support universal credit, but let me be absolutely clear why I believe that we have to do this. First, we inherited a complex mess of 30 different benefits. There are seven additions relating to disability alone, which are complicated for people who are disabled. They are often confused about what to do. Some payments are available when a person works for 16 hours, some at 24 hours and some at 30. Some are withdrawn at 40%, some at 65% and some even at 100%. Some are net and some are gross. One needs to be a mathematician to figure them out.

My previous permanent secretary admitted that one day, when he was listening to a lone parent who had come in for guidance on what benefit she would receive and how it would work if she took extra hours beyond the 16 hours at which she was already being supported. It took the adviser about 40 minutes to figure out whether she would be better off, marginally in the same position or marginally worse off because of the dramatic rise in the deduction rates. How can we expect every lone parent who is worried about authority and may not come in for help to understand what these things mean? The complexity and confusion are a problem. The decision whether to go to work is often a marginal one, and many people do not feel that it is worth while.

It is small wonder, therefore, that even before the recession there were over 4 million people on out-of-work benefits and 1.4 million people who had never worked at all. Things then got a lot worse because of the recession. The inheritance that we received included 5 million people on out-of-work benefits, youth unemployment already high and more children in workless households in this country than in the rest of the EU—that is a staggering thought. And that came after years of growth and plenty, which the previous Government wasted.

Ending that failure is a monumental task, and we have undertaken it because it has to be done, whether there is a Labour Government, a Conservative one, a coalition one or even a Liberal one. Universal credit is one of the most fundamental reforms to the welfare system, and it deserves to be supported and helped.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I have given way quite a bit. If the hon. Lady will give me a little leeway I will give way again later, but I want to make some progress.

A single payment, withdrawn at a clear and consistent rate when people move into work, will make work pay at each and every hour and remove the stumbling block in the current system whereby, as I said earlier, some people lose out dramatically. They lose 96p in every pound that they earn, which cannot be an incentive to go to work. Nobody here would take work at that rate, and trying to get the deduction rate down has to be a good reason for our reform.

The Opposition say that they are concerned about work incentives under universal credit. I reassure them that, as I said earlier, the flat 65% withdrawal rate will mean reduced marginal deduction rates for 1.2 million households. What is more, 80% of those gainers are in the bottom 40% of the income distribution. Why am I, as a Conservative, having to stand here and tell the

Opposition that that is positive? Surely they should have ensured that it happened during all the years when they were in power.

Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne

The Opposition have mentioned the Work and Pensions Committee a few times. I am a member of that Committee, and although the Opposition are absolutely right to say that there were some concerns about universal credit, the Secretary of State might be interested to know that the Committee universally supported the concept of universal credit to make work pay.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I thank my hon. Friend for those comments.

Photo of Luciana Berger Luciana Berger Shadow Minister (Energy and Climate Change)

I listened closely to what the Secretary of State said about 1.2 million people having better marginal deduction rates, but his Department’s own impact assessment shows that 2.1 million people will be worse off in work as a result of universal credit.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

The reality about marginal deduction rates, as I have just said, is that the massive majority of the money that we are investing will go to those in the lowest income groups, which has to benefit them. People who would otherwise not enter work because of the margins will now find that it is beneficial to do so. Despite what the hon. Lady and the right hon. Member for Birmingham, Hodge Hill, have said about marginal deduction rates, the median increase will be just about 4%. The truth is that there will be a massive improvement in the marginal deduction rate for vast numbers of households. As I said earlier, half a million people who struggled under the previous Government’s complicated taxes had marginal deduction rates of well over 80%. That will not happen under universal credit, which is a critical point.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I am going to make some progress, and I will pick up on some of the points that have been made as I go through my speech. If the right hon. Gentleman will bear with me, I will certainly give way to him later.

I turn to the delivery of universal credit. As I said earlier, its implementation is on time and on budget. Of course, the process is challenging, and I have never said anything else. The right hon. Member for East Ham knows that I have a huge amount of time for him and believe that he was an effective Minister. When we have discussed universal credit I have always told him that all our programmes have challenges and risks to them, but the job of Ministers and our officials is to manage that risk. Life has risks, and we deal with them and manage them. The universal credit programme is challenging, but we are investing £2 billion—I say again to the right hon. Member for Birmingham, Hodge Hill, that the figure is £2 billion—to get the infrastructure and IT systems right.

Photo of Liam Byrne Liam Byrne Shadow Secretary of State for Work and Pensions

But the Secretary of State must have seen the parliamentary answers that his ministerial colleagues have provided stating that the implementation costs for parts of the programme are now running at £103 million, £391 million, £600 million and £1 billion. By my maths, that adds up to £2.1 billion, which is £100 million more than the budget that he has set out. Is the programme on budget or over budget?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I am never keen to rely on the right hon. Gentleman’s maths—that is what ran us into trouble in the first place. Maybe this is a confessional now, and I will take that as a confession from him. All I can say to him is that we are investing £2 billion, but I will drop him a note about any detail that he is concerned about.

As I said earlier, we are making progress. We completed our first testing stages in August and have already held two open sessions with MPs, peers and the media and intend to hold many more. We will demonstrate the IT front-end systems next week and will do so again afterwards for many hon. Members.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Perhaps the hon. Lady will give me a little time. I think I have been reasonably generous—I am trying to be because I hope that we can discuss this issue in the right spirit. I will give way to the hon. Lady in due course, but first I would like to make a little progress.

We will be ready to roll out universal credit across the country in October 2013, and before that we will launch the pathfinder scheme in Greater Manchester in April 2013—perhaps some hon. Members do not know that yet, but that is the reality. As I have said, the phased transition from current benefits and tax credits is expected to be completed by 2017, and the safe delivery of universal credit will be my primary objective throughout. For what it is worth, I take absolute, direct and close interest in every single part of the IT development. I hold meetings every week and a full meeting every two weeks, and every weekend a full summary of the IT developments and everything to do with policy work is in my box and I am reading it. I take full responsibility and I believe that we are taking the right approach.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Perhaps I could make a little progress, and then I will give way because I know that hon. Members have questions.

I believe that we are taking the right approach; we have supported the scheme and our methods have received support elsewhere. Our use of the “agile” process has received good support from the independent Institute for Government, which in “Fixing the flaws in government IT” stated:

“The switch from traditional techniques—” those used by the previous Government, and others—

“to a more Agile approach is not a case of abandoning structure for chaos. Agile projects—” those used in the private sector—

“accept change and focus on the early delivery of a working solution.”

I do not underestimate the scale of the undertaking. Some 8 million households will be affected because they are in receipt, either wholly or in part, of some kind of support. I believe, however, that the Department is capable of implementing programmes of this kind. It has the best record, just as it did when the Labour party was in government, as Opposition Members will recall. The delivery of employment and support allowance was a good example of that, and the right hon. Member for Birmingham, Hodge Hill who was involved in that knows too well the quality of the Department for Work and Pensions. Although the scheme is not without risks, the Department understands that and we have brought in a huge number of people and bodies from outside the Government to help implement it.

Several hon. Members:

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Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I will give way to two people, first to Chi Onwurah because she was first, and then to my hon. Friend Mr Leigh.

Photo of Chi Onwurah Chi Onwurah Shadow Minister (Business, Innovation and Skills)

The Secretary of State was speaking about his pride in the investment in IT systems that his Department has undertaken, but is he concerned that by making universal credit available primarily—and eventually solely—online, he will be dependent on investment by other Departments in the broadband infrastructure in this country? By abandoning Labour’s universal promise of broadband availability, many vulnerable people will not have access to broadband, and will not be able to benefit from universal credit.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I was coming to that point, but I will deal with it now because the hon. Lady has a legitimate interest and all hon. Members will want to know about this issue. Two things are important. First, we must understand that the Government and the benefits system must move alongside what is happening in work. Those in receipt of benefits—often long-term benefits—are often outside and excluded from the workplace because of their lack of ability to work with and manage IT systems. We want to help them to enter the world of online work.

Secondly, the vast majority of people claiming benefits today already use computers and the internet—around 80% of those who claim jobseeker’s allowance use computers. Importantly, however, not all of them use their computer for claiming benefits, which they often do on the telephone. Over each month we intend to move more of those people to an online process of claiming—already more than 30% of people have started on that, and we intend to increase that figure first to 50% and eventually to 80%. We know, however, that to do that we may need to help people enormously, so jobcentres will be fitted out—we are doing trials—with computers and telephones that connect people directly to contact centres. My plan is for contact centres to get people on to their computers and work through the process with them. One reason people are worried and do not want to go online is that the present online system is not good. It is notchy and difficult—I have used it myself—and difficult to get through. We are developing and designing with claimants, jobcentre staff and local authority staff a front-end system that will be much simpler and easier. I will demonstrate it to colleagues on both sides of the House when we have time—I will do so next week, but on other occasions, too.

The whole idea is to move people to the new system, but we will of course retain the scope to deal with those who have difficulty.

Several hon. Members:

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Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I am dealing with those who have difficulty with the new system. I will give way twice more—first to Dr Whiteford and then to my hon. Friend the Member for Gainsborough—and then get on.

Photo of Eilidh Whiteford Eilidh Whiteford Shadow SNP Spokesperson (International Development), Shadow SNP Spokesperson (Women), Shadow SNP Spokesperson (Work and Pensions), Shadow SNP Spokesperson (Agriculture and Fisheries)

Will the Secretary of State address the question of implementation in the devolved Administrations? A wide range of policy areas is affected. UK Ministers have held informal discussions with the Scottish Parliament’s Welfare Reform Committee, but will he make a commitment that his new ministerial team will engage with the Committee, which has expressed concern in the past that such engagement has lacked substance?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Absolutely—nothing makes me happier than getting out of London to visit the devolved Administrations, whether in Cardiff or Edinburgh. I shall spend a day in Edinburgh next week speaking to that Administration about this very subject, as I have done on a number of occasions. I am engaging in the same way in Wales, as are my colleagues. I can absolutely give the hon. Lady that guarantee.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

If the hon. Gentleman will forgive me, I said I would give way to my hon. Friend the Member for Gainsborough.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Commission

The problem with IT systems in the public sector, rather than the private sector, is the sheer scale of numbers—8 million households will use the new system—the complexity of the issues and the lifestyle of the recipients. I saw more failed Government IT systems in my time on the Public Accounts Committee than I have had hot breakfasts. I beg the Secretary of State to be cautious, to test and re-test, to pilot and re-pilot, and not to believe a word spoken to him by IT companies or his civil servants.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

My hon. Friend was an excellent Chairman of the Public Accounts Committee—he is highly respected among Members on both sides of the House—and I absolutely agree with him. That is how I see my role. One thing I have done is brought into the system a red team, whose job is to go through and doubt everything I am told, and to ask questions. Being a sceptic and not believing are part of the process of delivering. I absolutely understand that. We are involving others in the process—that is our purpose.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Does my right hon. Friend share my concern that much of the Opposition case is based on the idea that people are basically thick—too thick to use the internet, too thick to budget monthly and too thick to pay the rent? A cornerstone of universal credit is that we trust people and believe in them. We want to encourage people to work and to manage their own affairs.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I understand what my hon. Friend says. He refers to the fact that people need to be helped—that they are often more intelligent than we give them credit for, but that they lack local knowledge and instruction. A legitimate concern of Members on both sides of the House is to protect those who are the most vulnerable. I will always assume their best intents. It is our job to ensure that we meet those concerns—that is my purpose and I intend to meet it. He is right that we should assume that people are intelligent enough, but that we have to get them to the point at which they use the system.

Several hon. Members:

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Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Let me make a bit of progress, because others might want to speak.

We have discussed finances. The Government have always made it clear that the £2.5 billion is additional and that that was how it would work. We have always agreed on that. The nature and design of universal credit means that this is an iterative process. The reality is that we learn as we do the developing. One thing that “agile” allows us to do is to rectify previous assumptions that things have improved because of changes. I can confirm to my hon. Friend the Member for Gainsborough that, as we proceed with the IT project, “agile” will allow us to ensure that we do not wait to the end moment to test it; we are testing stuff pretty much the whole time.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

May I make a little progress? I think I have been reasonably generous in giving way. I promise that I will try to get the hon. Gentleman in later.

On our engagement, it is clear from what I have just said that the independent OBR has open access. We have been in regular discussions. The right hon. Member for Birmingham, Hodge Hill described it yesterday as a think-tank, but it is not a think-tank. It accredits and decides whether the Government’s calculations and projections are correct. No one has a perfect view of the future, but at least it is independent of all political positions and positioning. It is working with us at the moment. I can assure hon. Members that the process is robust and will continue until the Government announce the final rates for universal credit and the OBR includes them in its forecasts. That is what we are working to.

Elsewhere, we are continually engaging with a host of organisations. The Work and Pensions Committee’s inquiry concluded, quite legitimately, that organisations have concerns. Of course, they will be concerned and will want answers, and we are working and talking with them. We are also dealing with local government, and have shared our draft regulations with the Social Security Advisory Committee and are carefully considering its advice. We are in regular contact with local authorities. We recently visited many local authorities and are informing them about policy work and regulations.

We are consulting on the future—this was raised in one or two questions—of the passported benefits and the interaction with universal credit. That is taking place right now, and we are discussing the matter with the regular and other Departments. They have to decide what they want to do, and we must decide how and whether to incorporate that into universal credit. That process is under way. Rather than constantly saying, “We can’t do these things, it’s impossible, so we won’t try”, it is worth trying to get the system right. One problem for many people is that they have to go to so many places for so many different things, they get confused and often do not get it right, and each time they feel a bit more worn down. If we can smooth out that process and make it easier and more accessible, in due course we will improve the lot of those in the greatest difficulty.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee

Does the Secretary of State now regret responsibility for administering council tax benefit being given to local authorities? That seems to fly in the face of the whole concept of universal credit and creates the very difficulties he claims he is trying to solve.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I am a huge admirer of the Chairman of the Select Committee, but her inducements for me to express any personal opinion must be resisted. My general view is that localisation is a good thing, and I am sure that local authorities will robustly deliver a system that works brilliantly. Collectively, we are absolutely in favour of it.

Photo of Michael McCann Michael McCann Labour, East Kilbride, Strathaven and Lesmahagow

The Secretary of State explained that the process is more or less on track. If so, will he explain the difference of opinion that led the Prime Minister to believe that he should be removed from his post?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I am not one for discussing what goes on privately. I have been kicking around this game long enough to know that sometimes people like other people to move or be promoted, but some of us are not interested in careers. We reached a settlement and we are very happy—it was a happy discussion. We are a Government of friends, we get on enormously well and we do not need to worry about what everybody else says about us.

Photo of Jake Berry Jake Berry Conservative, Rossendale and Darwen

I would like to take my right hon. Friend back to the online delivery of the universal credit. Although figures vary, he will be aware that the vast majority of people living in social housing have no access to the internet. BT does a social housing telephone tariff. Will he explore the possibility of a social housing broadband tariff to enable those who want to claim their benefits online to do so?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

Absolutely right. That is exactly what we are trying to do, and I will ensure that it is one of the areas we look at. That is the whole process we are engaged in. If we can get more people in social housing online, the net benefit will be phenomenal. We are all desperate for more broadband, but the people who will benefit the most—for shopping and so on—will be older people and others in difficulty on lower incomes. They will benefit massively, if we can begin to get them online. This is a crusade as much as anything else.

Photo of Joan Ruddock Joan Ruddock Labour, Lewisham, Deptford

I am extremely grateful to the Secretary of State for giving way. He said earlier that he would not publish the business case, despite the request. I wonder, however, whether he can tell us something that we assume might be in the business case. How many hours working in the economy does he expect to see increased as a consequence of introducing universal benefit next year?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

If the right hon. Lady will forgive me, I am not going to give her specific details now, although I am happy to talk to her at greater length later on. The point I would simply make is that universal credit is designed to get more people who are below work, as it were, to cross the line into work. When people ask, “What is universal credit really about?”, they always talk about the taper. That is really important: simplifying the taper allows people to move up the hours. In truth, however, universal credit’s key component is the disregards—the bit we call the participation tax rate. In other words, right now, unless someone goes straight to 16 hours as a lone parent, for example, the participation tax rate—the moment when they join work—is so high that there are households that need two earners in work just to have enough money to survive as a household. The idea of universal credit is to break that down and improve their lot. I cannot give the right hon. Lady the detail, but I believe that more people will move up the hours, with more people moving into higher hours and longer-term work.

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

I thank the Secretary of State for giving way. He has said that he is taking a hands-on approach to the developing IT system. Will he assure us that the IT system, which will also cover Northern Ireland, will be formatted to allow both the continued weekly or fortnightly payment of benefits, if that is the policy of the Northern Ireland Assembly, and the direct payment of housing benefit to social landlords, which is the policy of the Assembly? Will the IT system also be able to cope with the problems of cross-border workers?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I was going to deal with a lot of that in my speech, so the hon. Gentleman is helping me to speed up. Let me deal with monthly payments. I genuinely believe that we need to get people on to monthly payments, for a very good reason. Right now, about 75% of the work force are on monthly payments. We looked at this issue—as I am sure others have—when I was at the Centre for Social Justice. One of the biggest stumbling blocks we found is that when people are out of work, everything is paid directly to them every fortnight, but when they go back to work they really struggle—particularly those who have been out of work for a little time—to cope with the first few months in work. We are looking to get as many people as we possibly can on to a monthly payment, so that when they go into work they have already completed that process and it is not a big break for them.

Of course we will want to identify—working with councils and local groups, and so on—those in real difficulty. Now, here’s the thing. Until now, nobody has really bothered much about them, unless someone—maybe an MP—makes a specific effort to try to get something resolved for them. What we are doing will make us look at why those people cannot cope and then start to surround them with support. It might be about their ability to budget; it might be that the family has serious drug problems, in which case we will need to get to that. So, we start looking at the reason, then we can resolve that and move them into the process. We will allow for the ability to settle at two weeks where we think it vitally necessary, but the mainstream will go to monthly payments. However, I am happy to talk to the hon. Gentleman further about that and help him out.

Photo of Marcus Jones Marcus Jones Conservative, Nuneaton

I thank my right hon. Friend for giving way and I wholeheartedly support the outcome he is seeking in implementing the policy. One of the greatest impediments to getting back into work, particularly for low earners, is child care. Will he outline what more the Government can do to support people with child care costs?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

The whole idea behind the universal credit is that it allows us not to cherry-pick child care. That is, we will support child care up the various hours, because at the moment the system is set so that people get it only at certain points. Universal credit allows us to do that, and we are putting another £300 million behind that. That is a major positive. Universal credit is also a major positive for lone parents seeking work, because of the increased ability of the first earner back into work to receive that money. That should benefit them enormously.

Let me try to address one other point that was made and then conclude. The Opposition have expressed some concerns about the universal credit and HMRC’s real-time information project, but the scheme will deliver a net reduction of £300 million in administrative burdens on employers. That is important, because the project will help enormously with the way we flow information, together with HMRC—and I stress “together”. The right hon. Member for Birmingham, Hodge Hill has made the point about that, both today and to me in the past, but I say to him simply: I am not letting this one go, as with some other Departments. We are locked into this. In fact, we have now placed one of the DWP people in the team working on real time information, which will report at the same time as the others. We believe that we are making good progress on getting RTI moving in the right direction.

The right hon. Gentleman asked what was to be done with the 20,000 housing benefit staff. We are dealing with this matter sensitively. We recognise that staff across the country will have concerns about the impact of the new benefit, which is why we are consulting local government right now. Although housing benefit will be absorbed into universal credit, we must not forget that that will not happen overnight. I am sure that any impact on job roles will be counterbalanced by, for example, changes to localised council tax benefit, which will require a number of staff. The administration of the social fund is also being moved down to local authorities, and there will be other work, too. This is a matter for us to discuss with the councils, but it can be dealt with sensitively. I do not think that we should get too concerned about it, but we need to deal with it. I think that there is scope for all of them.

I was asked earlier about the business case. We are constantly reshaping and remodelling it, and I do not think that we need to publish it. As I said to the right hon. Members for Birmingham, Hodge Hill and for East Ham, I am happy to discuss any issues surrounding it at any time. They are always invited in; it is always good to have a drink with them and discuss these matters.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

In Plymouth, we have more than 80% broadband coverage, but we do not have that level of broadband connection. A lot of my constituents are very poor and do not have internet access. They use their mobile phones to access the internet, but they cannot use them for downloading documents. There is therefore likely to be a surge of people going into jobcentres and elsewhere seeking support. My constituency also has quite a high level of illiteracy. Does the Secretary of State intend to bolster the number of staff in jobcentres to deal with that potential early surge, perhaps using some of the staff in housing benefit departments who could lose their jobs?

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

The hon. Lady obviously would not expect me to make a commitment on that now. I can tell her what we are doing, however. I have visited a large number of jobcentres and talked to the managers and staff about what will happen when we move over to the new process. A number of jobcentres are already trialling ways of speeding up the online process of moving people to the new system. We are going to install computers and have staff ready to advise people. When they come in to make their claim, they will be shown to a computer, with a telephone or an adviser, and helped through the process. So, if they cannot do it at home, they should at least be able to do it at a jobcentre, with guidance and help.

I am also talking to my colleagues at the Department for Culture, Media and Sport, because we really need to get broadband to all areas, and we need to do it pretty fast. I accept that that is a matter for the Government. We are not just telling people that they have to do this, and then forgetting about them. We are going to ensure that those who have no internet access have another way to complete the process. We are also looking at different ways of using mobile telephones for making certain types of claim. There is a whole process taking place, and nothing is being left to chance. If the hon. Lady has any ideas, we would be pleased to hear them. I am sure that they will be brilliant.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I was not going to give way again, because the Deputy Speaker is looking at me with the kind of look that says, “This boring bloke needs to shut up and sit down as soon as possible so that others can speak”, but if Ian Paisley is very quick, I will give way to him.

Photo of Ian Paisley Jnr Ian Paisley Jnr Shadow DUP Spokesperson (Work and Pensions), Shadow DUP Spokesperson (Environment, Food and Rural Affairs)

I thank the Secretary of State for his generosity, and I hope that I will not be too boring. What contingency plans is he working on to deal with a catastrophic failure of the new IT system? For eight weeks over the summer, the Ulster bank in Northern Ireland was effectively closed as a result of such a system failure. If it can happen to a bank, it will happen to the new system.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

As I have said, we are working through all of that. Of course we have to prepare for contingencies and for certain events, and we are looking at that right now. It is part of the process of developing the system.

No one has asked me about the security of the system, but I might as well be open about it. That is of course an area that we are working on. We are learning the lessons from what happened when the banks started operating online, and we are now engaged with various organisations, including GCHQ, and talking about those matters. A long, detailed, iterative process of work is taking place to try to cover every eventuality, and I promise the hon. Gentleman and the House that we shall leave no stone unturned.

I recognise why the Opposition wanted this debate, and I know that people have read bits and snippets from the newspapers. People should not always believe everything they read in the newspapers, however. Personally, I do not read them often these days for that very simple reason! None the less, I say to the Opposition and to every Member that if we get universal credit right—I believe that we will, and we are working to achieve it—it will benefit all our constituents. It is a major plus and a key reform—one that will genuinely define us as a Parliament that cared enough to take on the risks and achieve this. Not to do so risks too much for people as they head into the modern world unable to cope, unready and believing that they and their families will never see the process of work, which will scar them for the rest of their lives.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee 4:45 pm, 11th September 2012

This is a timely debate. I would say that, wouldn’t I, as I chair the Select Committee that happens to be undertaking an inquiry into the implementation of universal credit. I hope that today’s debate and the findings that my Committee will eventually publish—I cannot say exactly what they will be in advance—will help to highlight important issues to the Secretary of State and his Ministers, such as the questions that still need answers, the decisions that still have to be taken and the unintended consequences. I know that witnesses have already presented us with a number of such consequences in the evidence we have taken. Some groups will be worse off under universal credit and some will lose out. [Interruption.] I hope that the Secretary of State is listening, as he is due to appear before the Select Committee on Monday; he has until then to find out all the answers.

We know that major change costs money, not just in administration and set-up costs: the Government have said that there will be cash protection so that there will be no cash losers at the point of transition from existing benefits into universal credit. Those transitional arrangements will then be frozen until the universal credit level is reached or the cash protection will be lost when there is a change of circumstances.

The Government are already cutting large areas of support that people receive—in-work credits next year, for example, while housing benefit is already being reformed—and there are more changes to come. Child care tax credit is being reduced, while the rules for working tax credit for couples have changed so that people have to be in work for more than 25 hours in order to qualify. Under the new universal credit, certain things will not exist, particularly various premiums received by many disabled people and their carers. There probably will be fewer cash losers than originally anticipated as people move on to universal credit because quite a number of people will already have lost their benefits or have seen a reduction in their income. That is probably good for the Government in respect of transitional protection because it will cost them less, but it is potentially bad for the claimant who is going to have to live on less money.

This is a huge subject, so let me concentrate my remarks on the most vulnerable. Even by the Government’s own analysis, some people will not be able to manage the online claims system or, indeed, the monthly payments. The Government use the term “digital by default”, but it will be impossible for many people, perhaps because of their IT skills or indeed as a result of the cost of accessing the equipment. I was glad to hear the Secretary of State say that there would be terminals in Jobcentre Plus centres, as that has not come out to date in the evidence we have taken; let us hear the announcement on Monday.

The Government say that most people will manage the process or will soon adapt to it. It is great if they do, because if the majority are not able to manage the system as it has been designed, it would be a catastrophe. It would also be a catastrophe if the IT did not work. In that case, everyone claiming universal credit, including those who are computer literate and can manage the system, will be in deep trouble. This is not a single benefit such as tax credits. Then, when the IT went wrong or did not work properly in the first place, it meant only a part of the family’s income not being paid. Families were not left destitute, as they had other income to fall back on until the problem was sorted out or until interim payments were put in place. That cost an absolute fortune at the time. If the IT does not work for universal credit, families will receive no money. They will not be able to pay their rent, pay any bills or buy food. As is inevitable in such circumstances, it will take time for the arrangements to be put in place, and they may become destitute before that happens.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

Given the potential for arrears and non-payment of bills, there may be serious problems with credit ratings, which would have huge knock-on effects for many people.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee

We should also bear in mind the debt that those people will incur in the meantime, and the fact that, even when the money has been paid, it will be difficult for them to get back on to an even keel.

I know that the Government will not want to plan for failure, but, as was pointed out by Ian Paisley—who has now left the Chamber—they need to have a contingency plan in case the worst happens, or, indeed, the system proves to be susceptible to large-scale fraud. I hope that the worst does not happen, but, given the Government’s record of IT failures, the possibility must have crossed Ministers’ minds. It is not enough to say that the tax credit IT disaster was the Treasury’s fault, as the Treasury is involved in universal credit with real-time information, which is not being developed on the “agile” system by which the Secretary of State sets so much store.

I must admit that—apart from the disastrous Child Support Agency—the DWP has a better reputation than most for delivering new IT systems, although that is not saying much. However, all its previous systems have been delivered over a much longer time scale, with much more testing, than will be the case with universal credit.

The Government say that they have learnt from the experience of tax credit that there will not be a “big bang”, because not everyone will come into the system on day one. However, for individual families there will be a big bang, because all their benefit, or income, will be put at risk if anything does go wrong.

Let me return to the subject of those who will not be able to manage the new system. Let us take the best-case scenario that the Government have painted today, and assume that the IT system works perfectly, with no hitches; that most people adapt to the monthly payments; that the welfare rights people and all the other organisations are given lots of money by the Government, are well trained and provide plenty of advice; and that 80% of people—or even 90%, but the Government are saying 80%—are able to access the on-line form and make their applications digitally. Even if all that works, there will still be people who will not manage. The success or otherwise of universal credit will depend on how well they are catered for, even if the proportion is as low as 10% or 20%. If it is only 10%, that still represents 770,000 households. More than 1 million people will probably struggle with the system, and on the basis of the Government’s own figures the number could be more than 2 million, so I hope that the Government are paying a great deal of attention to that group of people.

Photo of Jane Ellison Jane Ellison Conservative, Battersea

Does the hon. Lady really think that the only measure of universal credit’s success will be what may happen to the most vulnerable, about whom all of us feel understandable concern? Does she not think that an important measure of its success will be the fact that it will increase incentives to work, and will make work pay for those who want to return to the work force?

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee

If the group about whom I have been talking cannot access the system, there is very little chance that they will be able to return to work. That is why the support is needed.

Photo of Iain Duncan Smith Iain Duncan Smith The Secretary of State for Work and Pensions

I had not intended to intervene, but I think that I ought to take up the point that the hon. Lady has raised. Our plans already take account of a number of people who will not be online. We want 50% of those receiving the benefit to be online when we launch the system in October 2013, and we want the proportion to rise to 80% by 2017. We have always had parallel arrangements for those who will not be online, and we will explain those key arrangements to the hon. Lady.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee

I thank the Secretary of State, and may I also make a plea for it to be easily accessible, high quality and free, which is very important, too?

The poorest in our society are already disadvantaged in the digital age. They have already fallen behind the rest of us. Universal credit and its reliance on digital claims could exacerbate that still further. Instead of giving people living in poverty the help and support, and the access to work, that raises them out of poverty, universal credit could plunge them further into poverty and disadvantage. That would be a disaster.

We will not know the full impact of universal credit until we know the level at which it is set. Despite what the Secretary of State has said today, only then will we know the real marginal reduction rates and who will be better and worse off—who will be up, and who will be down—and whether people genuinely will be better off in work. Only when we get the real figures for real families, rather than the scenario planning that has gone on thus far, will we be able to see whether universal credit will work and they will have more money. Until then, a lot of what we are discussing is just an academic exercise. We need to get those figures, and I hope they will come soon.

There is, however, a great deal to play for. I said on Second Reading of the Welfare Reform Bill that a single working-age benefit is the holy grail of welfare reform. It is now up to the Government to make sure it does not turn out to be a very expensive cracked clay pot.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover 4:56 pm, 11th September 2012

For me, universal credit is important first of all because of the message it sends. It sends a very clear message that everyone of working age in this country is needed and has the potential to do really well in the workplace—that they are needed to help to build up our economy and put the “Great” back into Britain. Too often in the past there has been a tone of pessimism which accepts that it is okay for people just to sit at home all day on benefits and do no work. We can see that in the figures. This Government inherited a situation in which some 5 million people were on out-of-work benefits, and 2 million children were growing up in homes where no one worked. Furthermore, 1.4 million of those 5 million people had been receiving out-of-work benefits for nine of the last 10 years.

Photo of Andrew Bingham Andrew Bingham Conservative, High Peak

Does my hon. Friend agree that the previous benefit system acted as a disincentive to people to explore work possibilities and their own potential, and that the purpose of universal credit is to allow people to get back into work and develop their potential, and thereby to liberate them from the welfare state?

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

I thank my hon. Friend for making that important point. That is, indeed, the kernel of what universal credit is about: it gives a clear message that it pays to work and it is good to work. The Opposition call themselves the Labour party, yet too often when in office they gave the impression of being the non-labour party. This coalition is on the side of the working person—those who are working in a job in order to earn money and bring cash back to their families, and thereby to lift their children out of poverty.

It was often said in past times that the best cure for deprivation is a job. Many people in my constituency live in deprivation. It is important to get people back into work, to incentivise and encourage people to be in work and to make work pay; that is an important message to send. That is why I see universal credit as a message of optimism saying that we want everyone to play their role, and that everyone is expected to play their role and to be active in the workplace.

I support universal credit because it is a simpler system. It makes the situation easier to understand. There are not five different types of payments; there is just one simple payment. It is a fairer system, too. Rather than people losing 90p in the pound—thereby entirely disincentivising them from working harder to get a pay rise or from working longer hours—only 65p in the pound will be withdrawn, which incentivises them to work harder and for longer, and to bring more prosperity back to their families.

Photo of Stephen Timms Stephen Timms Shadow Minister (Work and Pensions)

Is the hon. Gentleman worried, as I am, about the proposals of some local authorities to add a 40p in the pound taper on council tax benefit on top of the 65p taper he has just talked about? Under that approach, people who earn more would get less because they would lose more benefit than they would gain in income.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

The right hon. Gentleman knows, as I do, that the fine tuning of council tax is still under discussion and still under way, and I hope that that will come out in the wash. I represent a coastal constituency, so I watch that situation carefully, as I know my coastal MP colleagues have been doing. They, too, want to ensure that the low paid in our constituencies are not adversely hit. That is an important point, but it is a fine part of the detailing of the implementation of the policy rather than the overall purpose of the policy, which is to encourage work and to give people more money if they work harder, do better, skill up and get a better job. That is a really important thing.

Photo of Jonathan Reynolds Jonathan Reynolds Labour, Stalybridge and Hyde

The hon. Gentleman is talking a lot about how universal credit will make entering the workplace available to everybody. Is he concerned about the absence of the second earning disregard, which means that the second person in a relationship would not really have that work incentive? Is he concerned that perhaps behind some of this there is an assumption of a model where the man goes out to work and the woman stays behind at home?

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

The hon. Gentleman lives a bit more in the past than I do; I am the second earner in my household, as many men are in theirs. We Conservatives, as the more progressive party, understand that. He should know—[Interruption.] He has had his go. He should know that second earners in households will not lose out under the universal credit.

One thing that I particularly welcome is that universal credit is progressive; the poorest will gain most, according to the Institute for Fiscal Studies. It says that the bottom six tenths on income distribution will gain on average, while the richest four tenths will lose out slightly in the long run. This is therefore a progressive policy, benefiting the poorest most.

Photo of Kate Green Kate Green Shadow Minister (Equalities)

I wish to take the hon. Gentleman up on this point about second earners. The logic of the system is that for the second earner in a couple it will not be worth working more than a very few hours a week. The problem with that is that it will, in the longer run, inhibit that person’s labour market prospects and have an impact on that family’s future prosperity.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Six million second earners will be better off. Importantly, 2.5 million working families will gain in the long run from the introduction of universal credit—again, that is according to IFS figures, not the Government’s figures. The Opposition are normally so keen to use the IFS figures, so it is worth quoting those figures to them and underlining how many people will be better off. That contrasts sharply with the scaremongering that we have heard from the Opposition today.

The other really important thing is that universal credit will help to lift children out of poverty. Universal credit is a transformational change which will affect some 8 million households, and we hope that 900,000 individuals, including more than 350,000 children and more than half a million working-age adults, will be lifted out of poverty as a result. The real question is: why did the previous Government not do it? Why do the Opposition not embrace it and work constructively with the Government on the fine tuning and detailing of this policy to get the best for all our electors, in whichever constituency we represent.

We are also investing an additional £300 million in child care support under universal credit, on top of £2 billion already being spent under the current system. That is worth pointing out, given a lot of the scaremongering we have heard about child care, as it shows the Government’s seriousness about helping out with child care. That will mean that more families than ever before will receive child care support, including 80,000 prevented from doing so by the current hours rule.

Universal credit is the right policy and this is the right time for it. We know that government and IT systems do not make good bedfellows—they do not make happy couples—and that there have been difficulties in the past. However, the previous Government should not judge this Government by their standards, and we should look at the implementation of employment and support allowance, as that was not an IT disaster. The Department for Work and Pensions has a good record, so we should give it the benefit of the doubt. Nevertheless, we should watch carefully to make sure that all goes well and all continues to be moving on time. Universal credit is important because it is very much for the many, with 2.5 million households that will gain. That is an important part of the reform.

Finally, we should trust people. There is too much of a tendency in the House to think that no one can manage, that we have to spoon-feed everyone and that no one can take responsibility. It is assumed that if they find it difficult to take responsibility, they should be spoon-fed rather than encouraged, helped and enabled to take more responsibility for their lives.

Photo of Naomi Long Naomi Long Alliance, Belfast East

I agree that we want to encourage people to take care of their own affairs, but there is a conflict in that many people do not have the financial capability to do so. The funding for many of the organisations that provide them with advice and support is also under pressure, with the result that they do not have the capacity to support those people through that process. Does not the hon. Gentleman think that this is perhaps not the right time for such an approach and that we need to invest in services to give people financial capability?

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

Just because they do not have that capability today does not mean that we should write them off for all time. It does not mean that we should be pessimistic or defeatist, as the previous Government too often were.

Let us look at the facts. Some 75% of people in work today are paid monthly and if someone is going to go back into the workplace, they need to get used to monthly payments. When the previous Government moved from weekly to fortnightly payments, all the usual customers, suspects and groups popped up and said that it would be a disaster, but what actually happened? People managed. If we trust people, they often step up to the plate. We need to accept that people are able and responsible and have the ability to be successful in taking responsibility for their lives.

Photo of Nicola Blackwood Nicola Blackwood Conservative, Oxford West and Abingdon

I agree with my hon. Friend’s point about the need to trust people as well as the need to move towards monthly payments and increase people’s capacity to go back into the workplace. I understand that the DWP is considering which individuals might need exemptions and support for certain aspects of universal credit, and does he agree that there are certain circumstances in which exemptions and support might be necessary? I am thinking in particular of joint payments in circumstances where individuals might be at risk of domestic abuse, in which case joint payments might present a barrier to a safe exit.

Photo of Charlie Elphicke Charlie Elphicke Conservative, Dover

I am sure that the Minister will deal with that point when he winds up the debate, but I heard my right hon. Friend the Secretary of State say from a sedentary position that the Government are dealing with that. It is important.

Of course, there will always be cases where people are unable to use computers at all, because they have severe dyslexia or other such conditions, and we need to be understanding of that. I draw a lot of comfort from the fact that we are hearing from the DWP that jobcentres will help to lead people through the process to ensure that they can access modern technology and be up for using it. Surely that is right, because we want people in the workplace to be able to access and use the most modern technology. That is why we should not write people off.

Surely the more that people are using the internet, the more that they are used to monthly payments and monthly budgeting and the more they are used to paying their rent like everyone else who is not on benefits, the better. I urge the Opposition to consider a change of heart about trusting people, to think that people can take responsibility for their lives and to take a more optimistic viewpoint. We will then be able to send a clear message to people that we believe in them, that they have a role to play in the future success of the country and that more of them should be able to be in work and play their part in making this country great again.

Several hon. Members:

rose —

Photo of Lindsay Hoyle Lindsay Hoyle Chair, Panel of Chairs, Deputy Speaker and Chairman of Ways and Means, Chairman of Ways and Means

Order. Many people want to speak and the debate is important, so I am going to reduce the time limit to seven minutes. If Members try to reduce the number of interventions, that will help everybody to get in.

Photo of Gemma Doyle Gemma Doyle Shadow Minister (Defence) 5:08 pm, 11th September 2012

I am grateful for the opportunity to speak in the debate, mainly because, since I was elected at the last election, I have been contacted every single week by constituents who are concerned about the Government’s plans to shake up the benefit system—the so-called welfare revolution—and about what it will mean for them.

Universal credit was supposed to lie at the heart of that revolution, but it appears to be unravelling. The Secretary of State’s flagship project is descending into chaos; it is £100 million over budget and the timetable has slipped by several months. He needs to get a grip on it before it sinks and takes £2 billion of public money with it. I am surprised that he did not take the chance of a free transfer to another team to get him out of the mess.

A welfare project as all-encompassing as universal credit is too important to get wrong. We are not talking about numbers and schemes but about people having enough money to feed and clothe their children and keep warm. In Scotland we have experience of the Tory Government testing out their flawed policies and failing in the face of mass opposition, and I worry that this policy will be as disastrous as the poll tax. I sincerely hope that it will not.

One of the few things that most Members agree on is the importance of a welfare system that encourages people who are able to do so to look for work. It is very difficult for people to find a job at the moment, and if the Secretary of State is as compassionate as he makes out, he should recognise that when he does his tour round Glasgow. In West Dunbartonshire more than 19 people are chasing every job vacancy. At times in the past year that number has been as high as 40 and it continues to fluctuate.

The Government have cut the number of public sector jobs in West Dunbartonshire, including at Jobcentre Plus. The Scottish National party Government have excluded my constituency from any assistance such as from enterprise zones and the youth unemployment strategy fund despite the fact that when they announced the areas that would get money, West Dunbartonshire had the highest youth unemployment and had been named as the most difficult place in the whole of Scotland to find a job. The SNP continues to ignore us.

The people of West Dunbartonshire feel let down by both the UK and the Scottish Governments, and that may be one reason why they booted out the SNP council and elected a Labour one in May. They have never elected a Tory council, I am glad to say. Even for those people who are in work, many are now worse off as a result of the Government’s changes to tax credits. The new criteria on minimum working hours mean that some families will be better off out of work and on benefits. Is that really what the Government want; is it what their Back Benchers want? I really do not think it is, so I suggest that they look again at the system.

It should never be the case that it is better to be on benefits than in work—[ Interruption.] Well, this is what the Government are doing. If Government Members do not like it, I suggest that they tell their Government.

Photo of Nick de Bois Nick de Bois Conservative, Enfield North

So does the hon. Lady support the benefit caps that mean that some will be better off working? That is presumably why she voted against them.

Photo of Gemma Doyle Gemma Doyle Shadow Minister (Defence)

I want work to pay for everyone and what the Government are doing means that it does not for some families, and that is the black-and-white truth.

In West Dunbartonshire 200 households are set to lose up to £4,000 a year as a result of the Government’s changes and, with the jobs market already very difficult and businesses struggling to keep afloat, it is almost impossible for people to increase their working hours.

Unemployment in West Dunbartonshire was falling before the Government were elected, but under their stewardship of the economy it is rising again. What the Secretary of State and his Ministers forget is that when they make a decision the people who pick up the pieces are the volunteers and staff who try to help people through the welfare maze. That includes the staff in Jobcentre Plus and in my constituency it includes West Dunbartonshire welfare rights service, the Independent Resource Centre and the citizens advice bureau. They are all swamped at the moment. They help people with appeals and frequently win them because Atos has such a low rate of getting it right the first time around. Even for people who win their appeal the stress continues because they are soon sent for further assessment; they are knocked back, taken off benefit again and go into a never-ending cycle of appeals and assessments.

One of the organisations has told me that often claimants are told on the phone that they have been judged fit for work, and that the clock has started ticking on the time within which they can appeal, but that they cannot make that appeal before they receive the formal decision notice, which often does not appear until more than a week later. I would ask Ministers to look at this issue; I hope that it is not an attempt to squeeze the amount of time that claimants have to make an appeal. The delay is certainly making it more difficult. The organisations in my constituency have also raised with me the problem of the IT equipment used to move towards the online system.

I also want to raise briefly a specific concern about the replacement of disability living allowance with the new personal independent payment. Earlier this summer the Prime Minister apparently intervened to ensure that injured veterans would not have to undergo further assessments for PIP and to protect their benefits, but I understand that no definite protections have yet been put in place. I have been contacted by a veteran who is very concerned that only those who qualify for the armed forces compensation scheme will be covered by the protections and that pre-2005 veterans who were injured during their service and receive a war disablement pension will not be covered under the protections. I ask the Minister to look at that issue and hope that we will have some clarity on it soon.

There were elements of the universal credit that sounded promising, such as a simpler and more streamlined application process, but there are many outstanding concerns, as we have heard today. I support a welfare system that makes work pay. I would also support a Government who create work, but this Government are failing to do that.

Photo of Nick de Bois Nick de Bois Conservative, Enfield North 5:15 pm, 11th September 2012

I am grateful for the opportunity to contribute to the debate. I am not recognised for praising those on either Front Bench, but I must say that I am pleased that both sides genuinely seemed to take a workmanlike approach to the debate. Furthermore, I hope that there is a genuine consensus that the debate is about getting people back to work, rather than labouring on about welfare cuts and so on, which would be the more stereotypical debate. I think that the premise that it is about getting people back to work is genuinely accepted. At moments during the debate I wondered whether Opposition Members are fair-weather friends of that argument, but I hope I am generous in assuming that it is the main goal.

I will set out a little context before turning to some specifics. In 2010 around 5 million people—12% of the working-age population—were effectively trapped on out-of-work benefits. It is also true that many of them—about 1.5 million—had been receiving such benefits for a considerable time, which meant that we were dealing with not only a personal problem that was individual to each of those people, but a cultural problem that demanded change to help move them from a life of dependency to one of independence.

Reforming welfare is as much about driving cultural change as it is about the process. We are fighting something that has become intergenerational and almost institutional. Worklessness and welfare dependency are two evils that are very close together and they do not simply develop in difficult economic times; we have enjoyed long periods of growth, yet 11% of the working-age population—some 4 million people—were on out-of-work benefits during those years. It is interesting, although worrying, that during the last economic boom employment rose by around 2.5 million, yet a great deal of that was in the public sector and more than half was accounted for by non-UK nationals. This is not an immigration debate and I am not trying to make that point, except to register the huge challenge we face in driving the welfare system to help put people back to work.

The shift is now about moving from handouts being at the centre of the welfare system to putting work first. I know that we could look over the previous Government’s time in office and say that they continually grew the welfare state—it is a fact; it happened—and I suggest that they did so with entirely the right intentions, but it has led to this generational and cultural issue. I think that we can alter this cultural perception so that working becomes something to aspire to, rather than the exception in many families.

In that context, I should like to address one or two of the concerns that have been raised, starting with the question of managing money and monthly payments. This is about a practical need. If someone who is unemployed goes straight into a job, there is a strong chance that they will end up getting paid on a monthly basis, and not many employers will give a new employee an advance.

Photo of Eilidh Whiteford Eilidh Whiteford Shadow SNP Spokesperson (International Development), Shadow SNP Spokesperson (Women), Shadow SNP Spokesperson (Work and Pensions), Shadow SNP Spokesperson (Agriculture and Fisheries)

The hon. Gentleman will be aware that many people who work in part-time jobs, particularly women, are still paid on a weekly basis. That is not unusual among lower-paid workers.

Photo of Nick de Bois Nick de Bois Conservative, Enfield North

That is why I chose my words carefully. Many people will be paid in that way. However, in this debate we risk letting the whole programme be driven by a group of individuals, be it those that the hon. Lady mentioned or those who are unfamiliar with computers, who may be in the minority but are none the less significant. That is not the right approach. I would turn the telescope round and look the other way, and help those groups to aspire to have control over their money on a monthly basis or to become computer-literate. That is the difference in emphasis that I would suggest. I see the hon. Lady shrug and sigh, but I offer those comments in the spirit of our all wanting to improve the quality of people’s lives and their opportunities to move forward.

Managing money is also about individual responsibility. We have seen an attitude building up whereby people are almost saying, “The state will look after me and the state will do this for me.” We cannot accept that any more; it is wrong. It does not encourage the right motivation to take responsibility for our lives, when we can. There must be a practical and moral drive to increase personal self-sufficiency.

The argument about computers is valid, particularly where broadband issues arise. I am pleased that Ministers have recognised the problem and will try to provide access to computers to overcome it. We have talked in terms of percentages. There are about 3,500 jobseeker’s allowance claimants in my constituency; I am pleased to say that the number is slightly diminishing. We should not call into question the proposed universal credit merely because 700 of those people may not be able to get access to or use a computer. If 2,800 people can do it, we should work harder to help the other 700 to achieve it. Perhaps that is, again, another way of looking at the problem.

Like others, I am very cautious about IT systems. When I worked in my own company, we used to plan for a bill of £20,000 and it often came in a lot higher and with few of the results that we needed. That is a fact of life. It is daunting to see some of the Government projects that have gone wrong in the past, so I applaud the approach that this Government are taking, and I think that the House rightly gives it credit. This computer system is not going to be launched with a big bang on day one; it is being trialled and done in stages, and that is correct. To be fair, we should give credit to the

Secretary of State and his team for learning from the lessons of the past in trying to drive good value. I wish him well in his task, as I am sure that the whole House does. I note that Labour Members have some concerns about this, but from the perspective of the overall goal, they are manageable.

Photo of Frank Field Frank Field Labour, Birkenhead 5:23 pm, 11th September 2012

I want to touch on three themes. First, the importance of this debate goes beyond universal credit, because it is the big test of whether an approach to welfare reform that has been increasingly based on means-testing is the correct strategy for us to follow. Secondly, I want to explain why I fear that this will be a disaster despite all the comforting words that we have heard. Thirdly, I want to suggest to my right hon. and hon. Friends that if that is the view that emerges in the country, we will need an alternative to strategies of the kind that we have been deploying for the past 50 or more years.

First, I have nothing but praise for the Secretary of State for how he has engaged with the debate. He has accomplished an extraordinary feat by getting into a new area, mastering it and introducing his own proposals; but the fact that he is so exceptional in that sense does not necessarily mean that his proposals will work or are desirable. Means tests rot the souls of individuals. We have heard lots of talk about how important this is and how people will be better off in work than out of work, but even if someone is a saint, means tests will corrupt them.

Let us assume that someone who wants to work is in the very small group of people whom we are paying more than 90%, which will be reduced to 65%. Under this reform, the number of people who will pay higher marginal tax rates will be higher than that under the previous proposal. What is being clawed back makes people question whether it would be worth taking on overtime, an extra job or getting qualifications. If those on the Treasury Bench think that the rich in this country will not get off their backsides and work harder if we tax them at 50% and that we therefore need to reduce the rate to 45%, why do they think that that stick of making people marginally better off will work for the poor?

There are two groups of people: those who are in work wondering whether they would be better off, and the 1.45 million people—which is the figure that Charlie Elphicke kept coming up with—who have never worked. If those on the Treasury Bench think that tweaking the marginal rates of tax will get a large number of those who have turned down jobs to actually work, they have another think coming. That is not to say that there are not huge armies of people who wish to work and who would jump at any job, but we delude ourselves and misrepresent our constituents if we believe that the whole body of people who are registered as having never worked since they left school are eager to get a job. They are not and they will certainly not be affected by universal credit.

My second point is on how the atmosphere has changed. During the Third Reading debate of the Welfare Reform Bill, the Government Benches were full and Government Members were baying at us. Their tails were up and they were confident about the reform, but look at them now—they are going to run out of speakers unless the Whips get more into the Chamber. By contrast, a galaxy of Opposition Members want to contribute.

[

Interruption.

]

The seven-minute rule has been applied purely and simply because we will not otherwise fit in all the Opposition Members who wish to speak. The atmosphere is changing. The Secretary of State will not have seen how glum his supporters looked when he was making his contribution. It is a totally different situation from that during the Second and Third Readings of the Bill. What some of us forecast is coming home to Government Members.

Let us put to one side all the IT schemes that we failed with and look at when we tinkered with tax credits back in 2005. That scheme was much narrower in scope than this one. The then Prime Minister had to come to the House to apologise for the chaos that we managed to create. Nearly 2 million people were being overpaid and there was little chance of getting the money back from them, and 750,000 people were being underpaid. The lessons for making the proposed changes, even if they are made in stages, are difficult. Although I wish the Government well, I doubt whether they will be that much better than we were when we implemented a reform that was far less ambitious than their scheme.

The disaster will not only come from the IT. Why the secrecy? Why has not the pilot on the operation of the scheme been released to the Department for Work and Pensions? The Secretary of State says that a member of the team is now in the Department, but I can tell him that, even if someone is a Minister in a Department, it is possible for people to make sure that departmental information cannot be accessed, never mind information that is shared by Departments. Why the secrecy over that? Why have the senior civil servants on this project been lost? Why cannot Opposition Members get more information about the real-time working? The crucial point is not whether Sainsbury’s or Marks and Spencer can fit into that—of course they will be able to. The problem is with the vast majority of employers from whom the Revenue already has difficulties getting an annual return, let alone a monthly return or an even more frequent one.

Perhaps understandably, the Government are secretive over their risk register. I hope that the National Audit Office will be more effective than Parliament has been in looking at that, so that we can be more aware of what the risks are and of how the Government have tried, or not tried, to counter them.

I do not have time to get on to my third theme. I will seek another occasion to discuss it. It is all very well for us to criticise what we fear is going to happen. Come the election, I hope that there will be an alternative proposal, based on real wage rates.

Photo of Frank Field Frank Field Labour, Birkenhead

I will give way, because then I can have an extra minute.

Photo of Graham Stuart Graham Stuart Chair, Education Committee

I was intervening to be helpful, because the right hon. Gentleman is making such interesting points, on which I hope he will expand.

Photo of Frank Field Frank Field Labour, Birkenhead

The alternative to the means-testing strategy that we have pursued with ever greater vigour over the past 50 years is to look at the distribution of incomes of people at work, to look at low wages and to ask how we can raise people’s real wages. Secondly, I believe that there must be a fundamental change in the welfare state from a means-tested system, in which we meet people’s needs, to the welfare state that was originally envisaged, in which people draw benefits because of the contributions that they make, either in work or in a wide sense to the community. I do not underestimate how fundamental that change would be, but when the system crashes, we will need an alternative.

I am immensely grateful to the Chairman of the Education Committee for allowing me the time to make that point.

Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne 5:31 pm, 11th September 2012

It is a privilege to speak in this debate and to follow Mr Field, whose speeches on this matter I have read for many years.

The issue of benefit dependency was one of the triggers that drew me back into politics 10 or 11 years ago. That is why, once I was elected, I became a member of the Work and Pensions Committee. I have been very involved in its work ever since, along with Dame Anne Begg.

We must remind ourselves of the figures that have been talked about. There are more than 2 million children in the UK living in households in which nobody is in work. That figure is from 2005 or 2006, when the economy was booming. I imagine that the figure is much higher today, because of the recession that we have been in since 2008. The Secretary of State reminded us that there are more children in workless households in the UK than across the rest of the EU, which is a shocking statistic. Such figures are the reason why many Members from all parties feel so strongly about this subject. Although there are anxieties about universal credit, which I will touch on in a minute, we all in our hearts hope and pray that it works.

Over a period of 30 or 40 years, not because of a conspiracy or through malice, but through society trying to do the right thing, a chronic situation has developed in which for many of our neighbours, colleagues and constituents, it simply does not make rational sense to work. I spoke to a young woman on Saturday at my surgery. She had come to see me about a different issue, but we got on to this matter because she knows that I feel strongly about it. She pointed out that she was losing five or six quid a week by working. It would make financial sense for her to go on to benefits. Luckily, she is the sort of person who would see that as the road to perdition, so she is sticking to her job, hoping that she will earn more money in a year or two. I thought to myself, “This is absolutely insane. How have we got here?” We all know that it has been down to a series of actions over 30 or 40 years, but we are where we are, so how do we change things?

I am anxious that someone with such a reputation on the subject as the right hon. Member for Birkenhead feels so negative about universal credit. That makes me nervous, because he has a lot more experience in this area than I have. None the less, let us see what we have got. We have got the biggest shake-up of the system in 40 years. That is not necessarily a good thing—a number of colleagues have talked about the history of public sector IT programmes, and I do not even want to go there—but it is a substantial change.

I defer to the right hon. Gentleman somewhat—forgive me for mentioning him again, but it is a privilege to speak straight after him—in agreeing with him that the opinion has become ingrained in many of our citizens over a number of generations that there has to be some sort of means-testing process to get people into a position in which they are prepared to work. That is linked to the Work programme. For all its challenges, of which there are many, it recognises that we have to offer training providers enough money that it is worth their while to get people into work and sustain them there.

I mention that because before I was elected I was a trustee of the Royal National Institute for Deaf People and was involved in a number of disability charities. For many years, training providers used to do what they called creaming and parking. They would take people who were job-ready from the jobcentre, turn them around very quickly, get them a job and take the money from whichever Government were in power, either Labour or Conservative. The premium for those providers was so little that they put people who were a long way from the job market in a corner and did not bother with them. That situation built up over a period of time. As we know, the Work programme is modelled in such a way that training providers stand to gain a considerable amount of money if they get long-term benefit recipients into work. I am keen on that. I want the directors of training providers and the people who work for them to end up as wealthy men and women, because I know that if that happens, we will finally break the desperate cycle that has gone on for 30 or 40 years and third-generation benefit dependents will be getting jobs. Universal credit is crucial to that.

Will universal credit work? That is the $64,000 question. The Secretary of State is confident about the IT and confident that the programme is on budget and on time. Like a lot of Members, I hope and pray that he is right, because I do not want to wait another few years for the Labour party to come up with a plan, perhaps one put together by the right hon. Member for Birkenhead. It lost that opportunity 12 or 13 years ago. Frankly, I think that is a shame, but that is by the by. I am not confident that his ideas will ever come through into Opposition policy, so universal credit has to work. I urge the Secretary of State and the Department to listen to some of our procedural concerns about monthly payments, council tax benefit and which primary earner will get a household’s money, but otherwise I support universal credit wholeheartedly and look forward to its implementation.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs) 5:39 pm, 11th September 2012

I am pleased to speak in the debate and I applaud the many constructive contributions that have been made. I hope I can do as well. I start with one principle that I believe is agreed throughout the Chamber: that any reform now or in the future should be designed to enable people to get into work and to ensure that work pays. However, many concerns have been raised about whether the Government’s reforms will work or whether they will unravel rapidly and spectacularly.

I want to focus on the narrow subject of some of the most vulnerable people who might be badly affected by the reforms, if the reforms are not right and delivered correctly. I want to ensure that they are protected so that I do not meet in homes in my constituency, or in my office, people who say that they have been badly let down by unintended consequences. As the Minister knows, such people will visit his office, and they will be real people with real tragedies.

Baroness Tanni Grey-Thompson, who is far better versed with the group I want to talk about than I am, said:

“Cuts—such as those to support for most disabled children, and disabled adults living alone—are going to make the future considerably bleaker for many of the most disadvantaged households in Britain.”

I hope she is not right, but let me develop some of the detail behind that direct criticism of the reforms under discussion, which are to be rolled out progressively.

I welcome the fact that I am following Stephen Lloyd. He has a great background in representing some of the concerns we are discussing, and I am sure he would want the Minister to respond to them. The Minister can do so in his closing remarks, but I am happy for his officials to write to me.

Let us consider claimants who have children with disabilities. Under the proposals, the lower rate that will be available to families with disabled children is, if I understand correctly, significantly lower than the current disabled child element of child tax credit. I understand from Citizens Advice in my community, and others, that it has been estimated that the proposals will make such families worse off by up to £30 per week. If so, I guarantee that those families will wash up not only at citizens advice bureaux but in my constituency office, and I need to know what to say to them, where they can turn and how we can help them.

Another group is claimants who have disabilities. As hon. Members have regularly heard in their offices, disability premiums have always been a major aspect of the current means-tested support and recognise the many and complex additional costs faced by claimants with disabilities from things such as dietary requirements, extra heating for or adaptation of their homes, special aids, and so on. The disability premium is worth about £58 per week, and the disability element of the working tax credit about £54 a week. If claimants are to be significantly disadvantaged, I seek the Minister’s assurance that the proposed package will mitigate that. We are led to understand that around 500,000 fewer people will qualify for the new support when the disability living allowance is replaced by the personal independence payment. Once again, those people will turn up in the advice surgeries of MPs around the UK.

One final aspect concerns joint claimants who have limited capabilities. Under universal credit, couples who have limited capability at work, or in getting ready for work, will receive only one element that recognises restricted functions. Two individuals in a household might have much greater expenditure, but that is not reflected in the payment, which covers only one individual. Once again, those people will be coming to my surgery, unless the Minister can give a clear and categorical assurance that the proposals include some form of mitigation for those claimant groups, which include many tens of thousands of individuals.

I want to be broadly optimistic about the proposals and the principles behind them, but I share the worries that hon. Members have expressed—the proposals could unravel and there has been delay, and we do not know whether the planning and implementation will be effective and make them work. However, I want to ask the Minister specifically about the claimant groups who are at or below the poverty line, who could be the most significantly impacted by the changes. Have they been taken into account and is proper mitigation in place? If not, will he think again?

Photo of Richard Graham Richard Graham Conservative, Gloucester 5:45 pm, 11th September 2012

I begin my contribution to this important debate with a letter I received in 2007 from the ancient ward of Kingsholm in my constituency, where the Domesday Book was commissioned, and which is today home to Britain’s finest rugby club. The letter was from a young mother who wanted to return to work. She had been offered a part-time job and had done some detailed calculations, which she shared with me, and which showed conclusively that she would be about 10% worse off in work than she was on benefits. She wrote: “The system appears to have been designed to make sure that I should never work again,” and added for good measure that, “the depressing thing is that this letter will make absolutely no difference at all.”

My reply at the time was that the situation my constituent described was morally wrong. I said I hoped that if my Government were given the chance, we would act to change things, and that one day I would be able to say to her, “We have made sure that work pays.” I still have her letter, and I hope to have the chance to write to her in due course to say that our dream has come true.

The motion could not be further from that dream. Indeed, although the shadow Minister, Mr Byrne, said in introducing the debate that we all want work to pay, it was not clear to me that his heart was really in it. It sounded as if he rather hoped the scheme that the Conservatives and Liberal Democrats have worked so hard on would end in tears, or, as he put it, that it would descend into chaos—an inferno of incompetence that he awaits with some relish.

It was ironic to hear a call from the right hon. Gentleman to “dial up the competence”. After all, his Government designed the most complex benefits system in the world, and he left office apologising that there was no money left. He also reverted to form in calling for yet another play on the bankers’ bonus as a solution to the problem. I have said before in the House that he is an outstanding salesman of the absolutely unsellable policy of his party’s refusal to back any cap on benefits. This time, however, he has been pushed forward as a salesman without a policy. He simply attempted to rubbish and decry arguably the most important policy that the Conservative and Liberal Democrat coalition is proposing, which, sadly, his party was unable to construct during its 13 years in office.

If any hon. Member wishes for proof of that, I can offer a conversation that I had more than two years ago with Lord Freud, the Minister with responsibility for welfare reform. I asked him: “What is the difference between the work you did as an adviser to the previous Government and the work you do as a Minister?” He said, simply, “The most important difference is that whereas the previous Government talked about reform, this Government will deliver it.”

The motion contains several main criticisms of the work being done by my right hon. Friend the Secretary of State and his ministerial colleagues. The first is that universal credit is late and over-budget, but we have heard a convincing rebuttal of both accusations. For example, the roll-out of the pathfinder starts next April and more widely in October.

The second accusation is that there is widespread unease surrounding the implementation of the £2 billion IT project. I asked about this when a member of the Work and Pensions Committee and since then I have asked questions of the contractor and the Department, and I will go on doing so because there is no room for complacency. Again, though, the accusation of widespread unease is a bit rich—or perhaps the Opposition have realised that the situation with the £60 billion national NHS IT project that went so disastrously wrong under the former Government should not be repeated. On that, I am absolutely with the right hon. Member for Birmingham, Hodge Hill. We must ensure that the project is successful, and I am sure that Ministers are listening carefully.

Thirdly, the motion accuses the Department of creating such a bad design that it reduces work incentives. It has been designed to do precisely the opposite. Above all, the project is designed to provide strong incentives for everybody to return to work. It is not poorly thought out and there is no serious risk of it descending into chaos. It will affect 8 million households, lift 900,000 individuals out of poverty and reduce 30 complex benefits into something that even the humblest citizens advice bureau can understand and explain to the many constituents of ours who visit them. This is a vital project that we all should back. The impact of its not succeeding would be too awful for us to consider. Universal credit is the right thing. It is a noble goal and deserves our support, and my constituents will back it strongly. In particular, the woman who wrote to me in 2007 deserves a reply. That means that the motion should be soundly defeated.

Several hon. Members:

rose —

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. To accommodate as many Members as possible still wishing to speak, I am reducing the time limit to five minutes. I call Mr Ian Lavery.

Photo of Ian Lavery Ian Lavery Labour, Wansbeck 5:52 pm, 11th September 2012

There have been some thoughtful contributions this afternoon, but I must wholeheartedly disagree with the comments about cross-party agreement and how this is not about cuts.

Hon. Members can call me a party pooper, if they wish, but I want to consider the reality facing many people in my constituency and constituencies up and down the country. Let us face it, we are in a double-dip recession made in Downing street. In order to recover our finances, we need a suitable plan for growth and jobs in the economy. Twenty one people in my constituency apply for each job vacancy, and the only way out is with a plan B. It is no good denying that. It will not do anybody any good to deny that we are in times of extreme austerity.

This is a timely debate, because although millions of people were in London yesterday celebrating the fantastic, first-class Olympics and Paralympics—the best ever seen—the picture out there for tens of thousands of disabled, vulnerable, sick and unemployed people is quite different. Many people fear for their future, and rightly so, particularly given how welfare reform has developed over the past two years and what will happen with the universal credit. Lots of people will lose out.

My hon. Friend Huw Irranca-Davies mentioned disabled children. We have got disabled claimants. Carers are set to lose out, as, too, are joint claimants with limited capabilities, young lone parent and large families. We have not got any facts or figures on how much the universal credit will be per individual and how much the additional payments will be. The only figure we are sure of is the size of the benefit cuts—£20 billion. Some Members might say, as they regularly do in the Chamber, “This is not about impacting on the less well-off in society but about simplifying the benefit system and making it easier”, but I look at it differently: if we take £18 billion to £20 billion away from welfare in the name of welfare reform, somebody will lose out, and to stand up in the House and suggest otherwise is disingenuous. We must be careful not to start universal credit the same way we started welfare reform two years ago. We cannot have people worrying about losing their benefits—about appealing for benefits but being cast aside. If universal credit is introduced in the same way as Atos operates the work capability assessment, more people will become unemployed—booted on to the dole, some may say.

The universal credit will be introduced next year, and constituents of mine have received lots of letters and e-mails about its implementation and underlying principle. The Government hope for 80% take-up online, so people who prefer face-to-face interaction will have to use the internet, yet the 2009 digital report stated that 15 million still did not use the internet. I accept that it might be dated, being three years old, but I emphasise that many people still prefer not to use the internet.

Monthly payments, sanctions, the IT failure, joint payments and the transitional project have all been mentioned by hon. Members this afternoon, and I hope that the Secretary of State and his ministerial team will look at them all. We have to treat poor people with dignity. They are not asking for the earth and have never looked for luxury. They just want to live a life as near as possible to what we do. They do not want merely to exist.

Photo of Guto Bebb Guto Bebb Conservative, Aberconwy 5:57 pm, 11th September 2012

It is a pleasure to contribute to this debate. I refute the claim by Mr Field, who is no longer in his place, that there is a lack of interest among Government Members. Indeed, I spent my summer recess taking an interest: I visited my local jobcentre to see how it was dealing with the proposed changes; the two Work programme providers serving my constituency because I wanted to see how they were getting on; and a Tesco regeneration partnership store in Liverpool, which is an example of what can be done when large corporations work with the jobcentre system to get the long-term unemployed into jobs.

One clear message that came out of those visits was that the welfare changes were welcomed by jobcentre staff, who saw them as an opportunity to help people back into work, and by the Work programme providers, who understood the long-term issue at stake. The issue is not about getting people into six-month placements or getting them off the register for six months and then back on to it but about working with the unemployed to ensure their long-term capacity to work.

I represent a seaside resort in Llandudno, north Wales, which has seen a huge influx of people from eastern Europe to work in our hotels. They are wonderfully hard-working and welcome because of the level of service they offer. Nevertheless, it was of huge concern that although people were unemployed in my constituency, several hundred people from elsewhere in Europe were willing to work in the positions available. When I visited the Work programme providers serving my constituency, therefore, it was a pleasure to see a white board on the wall listing 28 jobs filled that August, several of which had been in local hotels and restaurants, because those businesses were engaging with the Work programme.

One message that came out clearly from those visits was that the Work programme providers were still having to sit down with people who wanted to take on a job and work out whether they would be better or worse off. I can tell the House that the Work programme providers and the clients I met were looking forward to the time when they would know for a fact that if they took a job, they would be better off.

The right hon. Member for Birkenhead made the strong point that if a 50p tax rate is problematic when it comes to incentives to work, then surely a 65p withdrawal rate is problematic too. I agree: a 65p withdrawal rate is problematic. It is an issue that we should expect the poorest in society to pay a 65% marginal tax rate, yet we acknowledge that a 50% rate was unacceptable. However, we have to put the issue in context. The fact is that we had—indeed, we still have—500,000 people facing withdrawal rates of 85% to 90%. If we can slowly move to a position where, regardless of the situation, people are better off when they work, we should not be carping about that. Hon. Members can of course make the arguments for a withdrawal rate of less than 65%—in due course I would support that—but this Government are taking difficult decisions at a difficult point in the economic cycle, in trying to change a system that has failed far too many of our fellow citizens. To argue that the change does not go far enough, when Labour sat on its hands for 13 years, is completely unacceptable.

The key point is this. I went to Liverpool and visited that Tesco store in Toxteth, which has the most wonderful views of the constituency of Birkenhead and north Wales. As a Conservative MP from Wales, I was slightly concerned about meeting Scousers who might not be the most welcoming of a Conservative politician. Under a partnership agreement with Jobcentre Plus, half the staff at the store had to have been unemployed for more than a year before being recruited and moving into a position. Visiting that store was a humbling experience. The retention rate in the first 18 months was 94%—that is, 94% of the staff who had been long-term unemployed were still in position. The pride that those people took in their jobs was something to behold, so when I hear people in this House saying, “Yes, the only jobs being created in this economy are in shelf stacking,” I just feel ashamed. The people in that store in Toxteth took pride in the fact that they were earning a salary, taking income home to their families and standing proud, knowing that they were making a difference.

However, there was one message that well and truly came out of that meeting. So many were saying, “I’m currently working 16 hours,”—or, “I’m currently working 24 hours”—“but if I go over that, I’ll be worse off.” If nothing else, the message from the universal credit to them must be: “Work 30 hours; work 40 hours—you will be better off.”

Photo of Kate Green Kate Green Shadow Minister (Equalities) 6:02 pm, 11th September 2012

It is a great pleasure to contribute to this debate. Of course I welcome the universal credit to the extent that it may encourage people to work at all. However, there is a danger that the fact that it has been designed to provide incentives to many people to work only in short-hours jobs will mean that more people will choose to work in short-hours jobs. Although those jobs can be a valuable stepping stone into further employment, particularly for those with caring responsibilities, we know that long periods spent trapped in mini-jobs can damage individuals’ future earning prospects. Mini-jobs are often more badly paid and more insecure than established jobs with more hours, yet those are exactly the trends that we do not want if we are to tackle in-work poverty.

It is clear that the Government are worried about that aspect of the design of universal credit, because they are planning to introduce into our benefits system—for the first time, I think—a measure of in-work conditionality, to push people working in mini-jobs into working more hours or perhaps getting a better-paid job. We currently have very little information on how in-work conditionality will work. We have not been told what additional resources will be available to Jobcentre Plus to implement it, who it will apply to or what additional training might be given to advisers to cope with the different challenge of dealing with people who are already in work. What we do know—from the DWP’s own research—is that in-work conditionality is one of the least popular aspects of what the Government are proposing when it is raised in the DWP’s research. I therefore invite the Minister to say a little more about in-work conditionality. It has been completely airbrushed out of the debate so far, but it will be extremely important to a substantial number of people who begin in low-hours, low-paid work.

I also want to reiterate the points made by my right hon. Friend Mr Byrne and my hon. Friend Jonathan Reynolds, as well as others, about how the logic of the system will push some people to reduce their hours of work, not increase them. My right hon. Friend mentioned the interaction with the rise in the personal tax threshold which, as the charity Gingerbread has shown, means that a £1,000 increase in the personal tax allowance will give £200 a year to every basic rate taxpayer, except those on universal credit, who will gain only £70. Similarly, as we know, the new system will disincentivise second earners in couples, the majority of whom will be women. The Institute for Fiscal Studies has shown that a second earner who is entitled to universal credit when out of work will initially lose 65% of every pound earned when they move into work, rather than 41%, as they do under the current, tax credits system. Indeed, the DWP’s own modelling shows that 900,000 potential second earners will face lower incentives to work under the new policy.

I am concerned about the payment mechanism, with payments typically going to one member of a household. Nicola Blackwood pointed out that there are particular concerns where there is a risk of domestic violence or abuse. There is also a concern that money might not get through to children when the element of the benefit that is related to child care or child costs is intended for them. I invite the Minister to explain whether he thinks it is feasible for a woman—or man—experiencing abuse in their relationship to ask the DWP for the benefit to be split or paid all to her, rather than to him. Surely that will precipitate further abuse. I would also like to know whether the Department intends to move towards allowing the benefit to be paid partly to each member of the household and what cost assessment has been made of taking on board requests to pay the benefit in a different way. Would it not be simpler to return to the model, which has been tried and tested—as this Minister knows particularly well—of paying benefits for children to the main carer and benefits for housing to the person with the rental obligation?

Finally, let me ask some quick questions about refuges. I welcome the assurances given today. However, as people are in refuges for only two or three days, because they are dealing with an emergency, can the Minister confirm that rent will be paid directly to the landlord in those circumstances? Can he confirm that where people are in receipt of dual benefits—for their own home and the time in the refuge—they will not be hit by the benefits cap? Can he also confirm that housing costs that are currently met by the benefits system will continue to be met in full? In fact, will the Department publish an equality impact assessment of the proposals? Regrettably, we have so far seen no such thing.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset 6:07 pm, 11th September 2012

It is a great pleasure to support the Secretary of State today. He is one of the most serious-minded members of Her Majesty’s Government, and he has put forward a proposal where there is amazingly little disagreement over the principle of what is being done. Indeed, the motion is not about the principle; it is about some of the practicalities. However, it is worth concentrating on what the principles underlying the universal credit are.

The first principle must be simplification. All of us know from our surgeries that the people who come in to see us—who are some of the most vulnerable in society—are confused and bewildered by the range of benefits that may or may not be available to them, the interaction between one and another, and the way they can become worse off by doing sensible things, which therefore encourages them to do things that are not in their long-term best interests. To move to a system that is simple and straightforward must therefore be an advantage, and it has, I think, broad support across this House.

Then there is the issue of the reduction rate—the rate at which people lose money from benefits when they move into work. I have spoken before in this House about the Laffer curve. It is often pooh-poohed by Opposition Members, although I see—as they themselves say—that there is an irony in that we quote it most often in favour of high-rate taxpayers and they quote it most often in favour of people on benefits. However, in my view the Laffer curve applies equally to both. People work because they get money out of it. It was Dr Johnson who said that nobody but a blockhead writes, except for money. It is not just writing that is done just for money; it is most employment—with the exception of being a Member of Parliament, which I think most of us are so privileged to do that we might even pay for the opportunity.

The importance of that point is that the withdrawal rate is going to be the absolute key. It is crucial that, at all times, being in work makes people better off than being unemployed, not only for their financial benefit but because dependency is bad for people and their families. It is destructive to their lives. It leaves them without a focus, unable to get up in the morning or to do anything. It can also lead to depression. We want a society in which people want to be, and are encouraged to be, in the work force, and in which dependency is an option that is limited to those for whom nothing can be done. We need to become a society in which dependency is rejected.

The principles behind the reforms are fantastic, and they are worthy of widespread support. I agree with my hon. Friend Guto Bebb that we would like the withdrawal rate to be reduced from 65%, but 65% is still a lot better than some of the very high rates that exist, which is extremely good news. In respect of the practicalities of the reforms, my admiration for the Secretary of State is unbounded. I have never before seen a Minister or an Opposition spokesman in the House being so open to suggestions, thoughts and questions about what they were doing, or being so careful about the way in which their proposals were being implemented.

It was notable at questions yesterday that, in response to a point about refuges raised by Tony Lloyd, the Secretary of State said:

“If he has any concerns that he thinks we might not have dealt with, my door is open for him to come and talk to me.”—[Hansard, 10 September 2012; Vol. 550, c. 14.]

That is a Conservative being open to a socialist Member of Parliament. Politics normally involves a Minister being defensive and saying, “I’ve got it right. You know I’ve got it right, and my troops will vote for me because the Whips have arranged that in advance.” It has been wonderfully refreshing to hear the Secretary of State go through all the points today. Has anyone ever seen a Secretary of State take more interventions than he did in his speech? In each case, if he did not have an immediate answer, he said that he would be willing to listen and to consider the matter, to ensure that we got this right. Pilots are being carried out, and the scheme is being implemented carefully and cautiously.

Photo of Jackie Doyle-Price Jackie Doyle-Price Conservative, Thurrock

Does my hon. Friend agree that the spirit in which the Secretary of State is approaching this issue stands in clear contrast to the approach of the Opposition, who have tabled this mealy-mouthed, negative motion? They are willing the reforms to fail, but we should all want them to succeed if we really want to make work pay.

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

I am very sympathetic to what my hon. Friend says. This is something of a puzzle to me, because the Labour Front-Bench spokesmen on this subject are among the most civilised members of the Opposition, and it seems uncharacteristic of them to table such a motion—[Hon. Members: “Hear, hear!”] I felt sure that they would be delighted to be flattered by me, of all people. What I have said about them is true, however; it is recognised by those on my own Front Bench.

However, the motion before us is extremely overstated. It uses the language of chaos and disaster, as did Mr Byrne, and calls on the Government “urgently to set out” plans. In contrast, the Secretary of State answered every question that was put to him. He was willing to listen, and he is doing something that, in principle, those on both sides of the House agree with.

Photo of Mark Durkan Mark Durkan Shadow SDLP Spokesperson (International Development), Shadow SDLP Spokesperson (Work and Pensions), Shadow SDLP Spokesperson (Foreign and Commonwealth Affairs), Shadow SDLP Spokesperson (Home Affairs), Shadow SDLP Spokesperson (Justice), Shadow SDLP Spokesperson (Treasury)

I thank the hon. Gentleman for giving way during his praise of the Secretary of State. Last week, the Secretary of State refused to accept a reasonable job offer and incurred no sanction. If that is okay for him, why is it not okay for others?

Photo of Jacob Rees-Mogg Jacob Rees-Mogg Conservative, North East Somerset

That was a most brilliantly phrased intervention. In turning down the opportunity to be Lord High Chancellor—one of the most ancient posts in the land, and one that most people would be honoured to hold—the Secretary of State showed his commitment to ensuring that the reforms will work. In turning down a promotion, he showed his nobility. Having listened to his speech in the debate today, I wonder whether there ought to be an amendment to “Erskine May”, so that when an argument has been comprehensively won by a Minister at the Dispatch Box, the debate could simply end, to a round of applause and cheering, with no further need for discussion.

Photo of Andrew Gwynne Andrew Gwynne Shadow Minister (Health) 6:14 pm, 11th September 2012

It is a pleasure to contribute to this important debate. The notion of making work pay should be supported by everyone in the House, but there are worrying signs in the Government’s proposals and unless they heed them, I fear that they will fail in their ambitions.

One of the two local authorities that cover my constituency—Tameside metropolitan borough council—has been selected, along with Oldham and Wigan councils, to be in the Greater Manchester pathfinder area. The Secretary of State mentioned the pathfinder areas in his speech. We are told that the aim of the pathfinders is to build confidence in the components of universal credit and to learn lessons for the larger-scale implementation of the scheme later in the year. Tameside council tells me that it agreed to take part in the scheme so that it could highlight any glitches in the new system that a borough like that might encounter, before the system was rolled out nationwide, so that the Government would be able to iron them out in good time.

I want to turn briefly to some of the specific concerns. There is general consensus on the ethos that work should pay, but there are real worries that such dramatic changes could disadvantage families and that, instead, work—or at least low-paid work—would not pay. On the proposal for monthly payments, the Minister will know that, at present, a significant amount of housing benefit is paid directly to landlords, and in particular to registered social landlords. The Department for Work and Pensions has announced eight local authority demonstrator pilots, and payments direct to tenants in social housing have been accelerated in those pilot areas from June this year. However, none of the pilots is in Greater Manchester. I do not know why; Oldham and Wigan were certainly long-listed. The Government should have a spread of pilots, in order to ascertain the impact that the changes could have in different types of communities. That is the first worry.

Secondly, as we have heard, universal credit is to be paid one month in advance, to mirror a monthly salary if the claimant gains employment. This is a real concern for private landlords and registered social landlords, not least because they expect rent arrears to increase. People might need more budgeting advice and assistance than is currently available. What assurances can the Minister give to me, to landlords and to my council that arrears will not increase in that way? What joined-up thinking has taken place between the DWP and the Department for Communities and Local Government to ensure that it does not happen? Ministers must also understand that residents, especially those under real pressure, will be seeking support from local advisory services, such as Citizens Advice and Welfare Rights, at a time when those services are being reduced as a result of spending cuts. That, too, is a real worry.

A further worry has arisen over the introduction of online application forms. We have already heard that between 5% and 10% of residents will require additional support with such applications. That is particularly worrying in an area such as mine, where there is a digital divide. A significant proportion of the community that I represent cannot easily access the internet and would need extra support to make a claim. Furthermore, this change comes at a time when publicly accessible community IT facilities are being removed as a result of Government cuts.

My final worry relates to the combined impact of other welfare changes, particularly when a transfer of responsibility to local authorities is involved. Local council tax support schemes are an example of that. Indeed, Tameside council tells me that there is still no information from the DWP about how the so-called localisation of council tax benefit will be co-ordinated with the introduction of universal credit, particularly in relation to the sharing of data. It is potentially the same residents who will be targeted by the reductions arising from the changes to housing benefit, to council tax benefit and to the under-occupancy rules. It worries me that those same people are facing a squeeze on their tax credits.

That brings me neatly to where I started. Unless the Government get a real grip on these issues, the new system will fail, particularly in constituencies such as Denton and Reddish where, sadly, the damage could be lasting.

Photo of Jane Ellison Jane Ellison Conservative, Battersea 6:19 pm, 11th September 2012

It is a pleasure to contribute to the debate. Needless to say, I do not share much of the scepticism of so many Opposition Members, who I fear are, in some cases, substituting extended concern about the detail, however right and proper, as a proxy for opposing the reform. Some of the support we have seen even for the principle of these reforms is half hearted at best. Given what we have heard in one or two speeches, one would have thought that this Government inherited some sort of welfare utopia in which all was working smoothly, nothing needed amending and only the uprating of benefits was necessary each year.

The situation we inherited was a complete shambles, which is apparent in a constituency such as mine. We are lucky in that many jobs have been created over the past decade in London, yet young people in my constituency have said to my face, “It isn’t worth getting a job; I’m better off sitting at home, playing on the internet and living on benefits”. If that is the case, we have to do something about it. The problem I see is an inter-generational one.

I have listened to many of the detailed speeches given by Kate Green in Public Bill Committee and elsewhere, and I know she makes many good points about the detail that have to be addressed, but this is also about committing ourselves to a principle, quite apart from the rising costs of the whole system. I have seen intelligent women in my constituency being infantilised and reduced to a position in which they do not even back themselves to manage their own finances monthly, and I have seen people with qualifications and degrees who have been out of work for a very long time.

Photo of Jane Ellison Jane Ellison Conservative, Battersea

I shall take just this one intervention, as we are running out of time.

Photo of Kate Green Kate Green Shadow Minister (Equalities)

No one is pretending that the previous benefit system was perfect, but we should equally acknowledge that for the overwhelming majority of people in it, work did pay more than being on benefits. One instance of how the system was effective in helping to support that is the fact that lone parent employment—mostly female employment—rose from 44% in the mid-1990s to approaching 60% today.

Photo of Jane Ellison Jane Ellison Conservative, Battersea

That intervention misses one essential point—that there were too many in the system altogether. We cannot go on as we are.

Concerns have been expressed about monthly budgeting and other issues, and it is right to look at them. One particular point I want to make in my limited time is about what I hope will be a real engine for creativity in respect of new products to help people. We cannot say that it is only a matter of providing advice services; we need to work harder as a society to create products that work for people who are vulnerable or less financially skilled and so forth.

I do not believe the point has been made this afternoon that there is a real opportunity for a degree of rehabilitation of the banking sector. I represent an area in Battersea where the Clapham sect was active between 1790 and 1830. Its members included Wilberforce and others who were great pioneers of social reform. Not every Member may know that nearly all the Clapham sect were from banking families. I was reminded of this fact by the vicar of St Luke’s church in my constituency this week. She is piloting a meeting to discuss how the world of finance can do more to help the poor and the vulnerable in today’s society, building on the work of the Clapham sect.

I think there is a real opportunity here for the banking sector to use some genuine creativity and to step into the breach and look at ways of providing practical assistance, putting something back into society in the form of serving vulnerable people who, to date, have largely not been catered for by proper banking products or the right support from that sector. It should not be all about the voluntary sector; there is an opportunity for people involved in banks to be true to some of the heritage of the social reformers who have gone before them. I am thinking about jam jar accounts and individual banking, which I know the Department is looking at, as they could prove to be important and life changing for many vulnerable citizens.

My main point is that the Labour party has got itself on the wrong side of this debate. I believe in the welfare state, which is one of this country’s most important and civilised achievements, but if we do not make it work, not just for the people in it but for society as a whole, and if we do not restore confidence in it, we fatally undermine something that represents, as I say, such an important and civilising aspect of this country.

Before I was an MP, when I was candidate, I received an e-mail that was rather similar to the letter my hon. Friend Richard Graham told us he received. My e-mail was from a young woman who was a trainee nurse and lived on one of the tougher estates in my constituency. She was a single mum bringing up two children, and she wanted to work. Every morning, however, as she walked down the walkway on her estate, she was mocked, as people shouted at her through the windows of other flats. They said she was a fool to go to work and asked why she was doing it. It is absolutely appalling that we have created a situation in which someone like that, trying to do the right thing for her family, is mocked by the people around her.

Unless the Labour party puts itself on the right side of this debate and understands that we create and maintain confidence in the welfare state as an important aspect of our country by being on the side of that nurse who wanted to go to work and by ensuring that the system always works for her, it will find itself left behind in this debate. I applaud the Government for what they are trying to do. There are risks, and the Secretary of State has been open about them today—of course there are risks in major reform—but it is about meeting those risks head on and making the reform work, not about naysaying it before it has even started.

Photo of Yvonne Fovargue Yvonne Fovargue Opposition Whip (Commons) 6:25 pm, 11th September 2012

Universal credit has been called a “welfare revolution”—the most ambitious, fundamental and radical change to the welfare system since it began. As with any language when revolution is mentioned, people are worried and concerned; and when they are worried and concerned about their future income and their benefits and want advice, where do they go? To the advice agencies—to the local citizens advice bureaux and the law centres, which have helped people in troubled times for more than 70 years.

What these worried and concerned individuals might not realise, however, is that the introduction of universal credit is happening at precisely the same time as some of the most destabilising and threatening cuts to our advice services are taking place. Welfare benefit cases are no longer eligible for legal aid, leading to a loss of specialist advisers. Many specialist advisers, who have often worked in the system for a long time, train the generalist advisers who often give their services for nothing, and they support them by explaining the intricacies of any new system. The specialist support unit has already gone and all its funding has been cut, so there is no one at the end of the phone to talk through the complexities and anomalies or to provide the training. Many centres are having to close their services due to the toxic combination of council cuts, legal aid cuts and other funding cuts.

I worked in a citizens advice bureau during the change from supplementary benefit, so I know that people come early and want their advice early. Advice agencies are already receiving a spike in inquiries. Even a modest change means that the number of inquiries goes up exponentially. Will the Minister set out the Government’s strategy on the role of independent advice provision? I also gently remind him that a strategy without the money behind it remains simply a vain hope. It is no use relying on Jobcentre Plus and the Benefits Agency or presuming that people will go there for advice, as those agencies are seen as an arm of government. People rely on their neighbourhood advice centres and people want an independent assessment of their benefit claim. The emphasis on claiming online will also increase the number of people requiring advice because only 17% of people deal with their claims online, and 31% of the poorest in society never use the internet at all.

I can remember that when the social fund was brought in, people had to go to Jobcentre Plus, which had a free phone for claims. Where in fact did they go, however? They went to citizens advice bureaux and the advice agencies, even though the free phone was available, because people go to the agencies that they trust.

I am concerned about the change in payments, too. What about the 20% of people who do not have access to a bank account? I remind Government Members that they voted down our amendment to the Financial Services Bill, which sought to make the banks provide socially responsible products for those who had been discriminated against. How will they be helped to open an account and manage their money, particularly when housing benefit will be paid to the claimant? Have the need for and availability of budgeting advice been considered, particularly during the switch to monthly payments?

The harsher sanctions regime is another concern, as the DWP’s own research has shown that vulnerable claimants have been more likely to be subject to sanctions.

That has certainly been borne out by my own constituency experience. A severely autistic claimant was sanctioned for not attending to sign on, when his appointment had been changed three times in three weeks and the last appointment letter was received after the date of the appointment.

I have a number of concerns about the social and human cost—and also the cost to the public purse—of failing to ensure that there is timely access to expert advice. Introducing a revolutionary new system at precisely the time when the advice services report that they are facing a “perfect storm” of funding cuts is unfair to claimants, will not help those who administer the system, and will affect the most vulnerable. I urge the Government to consider the role of advice provision in the pathfinder areas, and to assess the need for and funding of that advice in the roll-out.

Photo of William Bain William Bain Shadow Minister (Scotland) 6:30 pm, 11th September 2012

Let me begin with a statement on which there should be agreement throughout the House: a strong welfare state benefits all of us in society.

A growing body of evidence, extending from the International Monetary Fund to the Obama White House, shows that if we want to lift the current trend rate of growth, we need a fairer distribution of wealth across our society. We need more people to participate in the labour market, particularly the estimated 700,000 to 1.4 million women who are missing from employment in Britain in comparison with the rates in better-performing OECD countries. Our system of child care is less generous and more expensive than those of many of our trading partners in the European Union, and claims an ever larger share of take-home pay for many families. During the past 30 years the link between rising productivity and wages has gone and they have become decoupled, and that trend has accelerated over the last 10 years.

It is clear that there must be a wage-led recovery in living standards, with a living wage in the areas of the economy where it will work, and that companies must be made aware of the benefits to the whole economy of paying higher wages to their staff rather than increasing their short-term profit-taking. However, the role of the tax and benefits system will remain critical to a reduction in poverty, because from 2005 onwards the modest uplift in the living standards experienced by low to middle earners in Britain was exclusively due to the tax credit system. Other countries with better early-years education, which invested heavily in vocational education and skills, such as Denmark, and those with stronger collective bargaining systems in the workplace, such as the Netherlands, had even lower levels of pre-distribution poverty.

In principle, simplifying the tax and in-work benefits system by uniting them in a single integrated payment may have beneficial effects, but there is evidence that the government are failing to address potential weaknesses in several key areas.

First, the system becomes more complicated for the growing number of self-employed people, and depends on access to the internet. In my constituency, where the poverty level is drastically above the national average, more than eight in 10 people do not have access to the internet at home.

Secondly, the current design of universal credit appears to penalise lone parents. Gingerbread understands that up to 4 million of them, including 1 million who are in work, will lose out under universal credit. Estimates suggest that 150,000 of the poorest single parents could lose up to £68 per week, which would push 250,000 children deeper into poverty. The situation appears worse when we consider the increasing competition for part-time work in a weak labour market. The rate of under-employment among women aged between 16 and 24 has risen by nearly 5% in the last four years, and for women aged between 35 and 49 the figure is nearly 4%.

Thirdly, universal credit does not put right the harm that the Government have already done in regard to support for child care costs. According to Save the Children, 56% of mums say that the main issue preventing them from working, or making them consider giving up work, is the increase in child care costs. However, parents on low incomes are already paying more than they used to because of the 10% reduction in the child care tax credit. The Resolution Foundation found that last year child care costs rose by 50% for some of those families.

Fourthly, the much-trumpeted rise in the personal tax allowance will be counteracted by universal credit, because people on low incomes who receive the credit will no longer receive a reduction in their tax bills. A £1,000 increase in the personal tax allowance will give £200 per year to every basic rate taxpayer except those on universal credit, who will gain only £70. They will receive only a third as much from any increase in the personal tax allowance as the rest of the population.

Fifthly, there is a risk that the withdrawal of “passported” benefits such as free school meals, and the lack of a second-earner disregard in the design of the credit, will create new cliff edges in the benefits system.

Finally, those who take jobs after being unemployed for more than six months will not receive an extra four weeks on benefits to smooth their transition.

The benefits bill is rising by £9 billion because of higher unemployment. I think it is clear that the Government should be focusing on that, rather than taking money away from—

Photo of Stephen Timms Stephen Timms Shadow Minister (Work and Pensions) 6:35 pm, 11th September 2012

This has been a thoughtful debate which has covered a lot of important ground.

Let me begin by endorsing the concept of universal credit. It is a good idea to bring different benefits together. The last Government looked forward to a single working-age benefit, and the present Government are right to take that idea forward. It ought to make it possible to simplify the system, strengthen work incentives, and make those incentives clearer. It is in the task of translating those noble aspirations—which every Member in the Chamber has shared this afternoon—into reality that Ministers are struggling so badly. The Treasury is worried; the Prime Minister is worried, as we discovered from the reshuffle last week; and, as we have heard in the debate, people in the system are worried. The wheels are wobbling, and, as my right hon. Friend Mr Field pointed out, the public mood and, indeed, the mood on the Conservative Back Benches is becoming much chillier in regard to this initiative.

The first big thing that went wrong was the decision that the credit should not be universal after all. Council tax benefit, one of the most widely claimed benefits, has been left out. So we now face the prospect of a “not quite universal credit”. My right hon. Friend Mr Denham rightly observed that that was not the fault of the Secretary of State, who wanted council tax benefit to be included. The Secretary of State for Communities and Local Government wanted it to be excluded, and unfortunately the Secretary of State for Communities and Local Government won. It is now becoming clear what a blunder that was.

As I mentioned earlier in an intervention, Welwyn and Hatfield district council is consulting on a 40% taper rate for council tax benefit, on top of the 65% taper rate for universal credit. If the council proceeds with that proposal, for every extra pound that people earn they will lose more than £1 of universal credit. That is precisely the kind of lunacy that universal credit was supposed to abolish. The idea was supposed to be that work should always pay. I think that that was supported by every Member who spoke today, and it was mentioned specifically by my hon. Friend Gemma Doyle. However, thanks to the success of the Secretary of State for Communities and Local Government in winning a row with the Secretary of State for Work and Pensions, it will not now happen. Every council in the country will have its own council tax benefit scheme and its own taper, so people’s work incentives will depend on their postcode. So much, sadly, for simplicity.

Photo of Frank Field Frank Field Labour, Birkenhead

Is my right hon. Friend not being too kind to Treasury Ministers? The moneys for the rebates will be limited, and it will be up to local authorities to meet existing need, let alone new need.

Photo of Stephen Timms Stephen Timms Shadow Minister (Work and Pensions)

My right hon. Friend is absolutely right. The money is being cut by 10%, so councils must somehow come up with a scheme that will save 10% and will be introduced on a local basis. It will be chaotic. Many councils are saying that they will not be able to do it in time, and it will certainly mean that there will be no national taper that everyone can understand.

However, that is just the start of the problems. The project is not on schedule, despite what the Secretary of State said earlier. According to paragraph 21 on page 37 of his White Paper of November 2010, between October 2013 and April 2014

“All new claims for out-of-work support are treated as claims to Universal Credit. No new Jobseeker’s Allowance, Employment and Support Allowance, Income Support and Housing Benefit claims will be accepted.””

I believe that that is what my right hon. Friend John Healey was told. It is absolutely clear, but it is no longer true. A newsletter appeared on the Department for Work and Pensions website over the summer announcing that, in fact, that timetable will apply in only one Jobcentre Plus district per region. In all the other districts, the change will take place some time after October 2013 and by summer 2014. The timetable has slipped; it has been delayed from what was stated in the White Paper—I am delighted that the Secretary of State is back in his place. On the budget, to the end of the last financial year the project was due to spend £400 million. In fact, it spent £500 million. So it is already over budget, too.

I welcome what the Secretary of State said about online claims: he told us that the Department expects that at the beginning only about half of claims will be submitted online. That is a very significant change from what has been said until now in respect of the digital-by-default proposal. It would be helpful to know what will happen to the 50% who do not apply online. How will things work for them? When people have problems, who is going to help them? As my hon. Friends the Members for Denton and Reddish (Andrew Gwynne) and for Makerfield (Yvonne Fovargue) rightly pointed out, the introduction of universal credit will coincide with a drastic reduction in the availability of advice, just when people are supposed to be grappling with these new processes.

What about people’s documents? At the moment, people applying for housing benefit present their documents to the local authority. Where will they present them in future? Will people start turning up at jobcentres with their documents or will they be expected to post them somewhere—or will we no longer have the fraud checks that are currently built into the system?

This is supposed to be all about work incentives, but large numbers of people will find that their work incentives are worse. The Government apparently plan a simple income cut-off for free school meals. If people earn less than X, their children will be entitled to free school meals, but if they earn more than X, they will not. That is a disastrous new cliff edge—far worse than anything in the current system. It means that someone with three children who earns less than X will suddenly have to start paying out over £3,000 in school meal charges per year if their income increases above X by just a pound or two. That is a massive disincentive to people to increase their income.

We have been asking how Ministers are going to tackle this issue since March last year. We asked the Secretary of State when he would make up his mind when he gave evidence to the Welfare Reform Bill Committee. He said that

“during the Committee stage we should be in a much stronger position to make it much clearer how we will do that.”––[Official Report, Welfare Reform Public Bill Committee, 24 March 2011; c. 155, Q299.]

Some 18 months have now passed, and today the Secretary of State told us he is talking to various people about it. All this is supposed to be in place within 12 months from now and Ministers still cannot tell us what they will do, but it does appear that that very damaging feature will be part of the system.

I have asked about the publication of the business case. I believe that Ministers will not publish it because it projects that there will be no increase at all in the total number of hours worked as a result of the introduction of universal credit. In other words, the whole basis on which this project is being taken forward is flawed. That is partly because of the situation for second earners, which has been mentioned. My right hon. Friend Dame Joan Ruddock asked the Secretary of State what would happen to hours worked. He did not answer, and I think I have just explained the reason why. As my hon. Friend Kate Green pointed out, second earners in a couple face sharply worse work incentives than in the current system. We are going back to an outdated male breadwinner model, where the second person in the couple is not expected to work.

As my hon. Friend Mr Bain pointed out, incentives for self-employment are terrible, too. Tax credits have encouraged self-employment, but, under universal credit, the DWP will assume after the first year that people are earning at least the minimum wage for every single hour they are working in self-employment.

Photo of Nia Griffith Nia Griffith Shadow Minister (Wales)

Does my right hon. Friend share my concern that the Federation of Small Businesses is saying that this will be a disincentive to people to get up off their backsides and start their own businesses and get going? That suggests that something is fundamentally wrong.

Photo of Stephen Timms Stephen Timms Shadow Minister (Work and Pensions)

My hon. Friend is absolutely right, and that is because of the design that has been chosen. In July, the chair of the Low Incomes Tax Reform Group called for a rethink. He said:

“In many cases the income of self-employed earners will fall sharply making it, in some cases, uneconomic for them to continue to work.”

That is the opposite of what everybody in this debate has said universal credit is supposed to do, but that appears to be where we are heading. It is, I am afraid, a mess.

As you know, Madam Deputy Speaker, a great deal of care was taken over the design of tax credits to ensure that mothers receive cash support for their children. All those safeguards are deliberately being removed from universal credit, which will cause serious problems.

I very much welcome what the Secretary of State said yesterday about refuges. As we know, Refuge has been saying that it will have to shut all its domestic violence shelters. I am pleased that my hon. Friend Stella Creasy was able to secure a pledge from the new Home Office Minister, Mr Browne, that he will lobby DWP Ministers on that point, but how are the costs of other kinds of supported housing to be met? The Government concluded a consultation on that in October last year. Another year has passed, and nothing definite has been announced, and in one more year this is all supposed to be up and running.

As has been said, we do not know anything about how in-work conditionality will operate. I have not even mentioned Her Majesty’s Revenue and Customs’ real-time information system for pay-as-you-earn. That is supposed to start from next April. Every company in the land is due to start reporting PAYE to HMRC not, as now, once a year after the end of the financial year, but every single month. The Government say it will all happen automatically through everybody’s computerised payroll systems, but what about small firms that do not have a computerised system? The Low Incomes Tax Reform Group says:

“Businesses will have to draw up two sets of accounts—one for HMRC, the other for DWP—and the latter will have to be done monthly, thereby massively increasing bureaucratic burdens.”

This is a mess. It has not been properly worked through. Key decisions have not yet been made. It is no wonder the Treasury and No. 10 are so worried. The House should be too, and should support our motion.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 6:48 pm, 11th September 2012

Almost 20 Members took part in the debate, and we are grateful to all of them. The high point was when my hon. Friend Jacob Rees-Mogg suggested that the contribution of my right hon. Friend the Secretary of State had been so definitive that we should have a parliamentary procedure under which the debate simply ceases and applause follows.

We have heard some powerful contributions. I was particularly struck by what Members had to say about the attitudes to work that they had encountered and the experiences of some of their constituents, as well as about the barriers to work. My hon. Friend Richard Graham mentioned a letter he received before being elected to the House from someone who said she was demoralised by the fact that it did not pay to work. My hon. Friend said he came to this House wanting to do something about that, and he can be proud to be a part of a coalition that is doing something about it. My hon. Friend Jane Ellison mentioned the experience of a nurse who was heckled on her way to work for being stupid for going to work at all, because why would she bother? We have to end that situation. Although Opposition Front Benchers say they think work should always pay, they failed to deliver that when in office.

We must not lose sight of the big picture of this reform. We are bringing together separate strands into a single integrated system so that people do not have to go for their housing benefit to the council, for their jobseeker’s allowance to the DWP, and for their tax credits to HMRC. That will be good for tackling poverty, as it will lift many families and children out of poverty. It will also be good for tackling benefit take-up, because instead of having to claim several separate benefits, people will make a single claim. The suggestion that somehow the previous tax credits system was used as a model is absolutely extraordinary.

Someone said, “We all remember how terrible it was when people had their tax credits overpaid or under-claimed, or underpaid and claimed back.” That will come to an end because people will get the money when they need it. Under the real-time information, when their wage goes down, their tax credits—now their universal credit—will increase. They will not have to wait three years for a reassessment to claw back an underpayment; it will happen when they need the money. That is the way to tackle poverty.

Photo of Huw Irranca-Davies Huw Irranca-Davies Shadow Minister (Environment, Food and Rural Affairs)

The Government have justified their refusal to reveal the business case and, following an earlier intervention by my right hon. Friend Dame Joan Ruddock, have declined to answer how many additional hours of work will be generated as a result of these changes.

May I make things simpler? I ask the Minister: will these changes in the business case result in an increase in hours worked?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I am grateful to the hon. Gentleman for bringing me to the issue of work incentives. It was central to this debate, so let me address the point directly. Two separate work incentives have been muddled together in this debate, including, I regret, by Mr Field. The first is the incentive to take a job and the second is the incentive for those in work to work more hours. My right hon. Friend the Secretary of State, in introducing this debate, identified the fact that universal credit significantly improves the incentive to take a job. That is fundamental in order to move from a situation where, as we have heard, millions of people are in workless households where nobody is working. Of course the incentives for the second earner are important, but those for the first earner are even more important. We make no apology for prioritising them; we want far more households to have someone in work, which is why we have structured this as we have. We are therefore putting £2.5 billion extra per year, at a time when we are having to save on welfare, into in-work benefits, thereby improving the return to work. It must be the case that if we are spending more on in-work benefits, we are improving the incentive to work.

Photo of Frank Field Frank Field Labour, Birkenhead

Either the hon. Gentleman misrepresents me or I did not make myself clear. I said that, crudely, we are talking about three groups. The first is those who are unemployed and desperate to get back to work. The idea about incentives does not occur to them, as work is part of their DNA. We do not need to have reforms for them; we need jobs for them. The second group is those who regard their benefit as a pension, and no marginal increase in income is going to get them back to work. The third group is those in work who are deciding whether they will work longer, whether they will work harder and whether they will get new jobs. Will a scheme that puts their marginal tax rate up, as this one does for many people, actually be a work inducement?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Let me deal with that point directly. Under the current system, people who are below the tax and national insurance threshold and get tax credits and housing benefit lose 79p in the pound—that will fall to 65p. Under the current system, people who are above the tax and NI threshold and get tax credits and housing benefit lose 91p in the pound—that will fall to 76p. Under the new system, there will be almost no one who loses more than 80p in the pound, compared with 500,000 people who do so now. What is not to like about that? This is good news for work incentives.

Photo of Stephen Timms Stephen Timms Shadow Minister (Work and Pensions)

What is the Department’s assessment of the effect of the introduction of universal credit on the number of hours worked in the UK economy?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

As the right hon. Gentleman well understands, the impact on every individual will be different, so we have not used a specific figure for the number of hours worked. However, what I have demonstrated is that the people who face the biggest barriers to working more hours will see cuts in their marginal rates and the people who face the biggest barriers to working at all will get more return for working. So this is good news for work incentives. The right hon. Member for Birkenhead referred to the people facing an increase in their marginal rate, but that increase is by four percentage points, from a median of 41 to 45. That is the trade-off. We give people an incentive to take work and we tackle the most severe marginal rates, while some people face a four percentage point increase. That seems to me to be a good trade-off.

Quite properly, a lot of hon. Members raised the issue of internet access. We want to make it absolutely clear that the proposition is digital by default, so if we can get people in on the internet and online, we will do so. However, as the Secretary of State said at the start, we fully recognise that not everybody is online and not everybody will be, so the core planning for the universal credit contains provision for people who will not be online.

Some of the figures we have heard grossly distort the extent to which people of working age in the benefit population are online these days. The evidence suggests that 74% of claimants—not of the whole population, but of claimants—have home broadband and that 41% of claimants do internet banking. To hear the speeches we have heard in this debate, one would not think that these people even knew what a computer looked like. It has been suggested in this debate that we have to avoid patronising people on benefits, and that is absolutely right. We want to support people who are not online—jobcentres will play a part in that and we are talking to local authorities about it—but let us see this as an opportunity to get more people to be internet savvy, online and more employable. Let us not condemn people; let us give them opportunities and training.

The impact of this measure is very important, and Kate Green asked about the equalities impact. We will publish an updated equalities impact assessment with the final regulations after the autumn statement.

Mr Bain gave some bizarre figures about the impact of this reform on lone parents, and I do not know where he got them from. Lone parents gain from universal credit: 400,000 lone parents who rent will gain, as opposed to 200,000 who will have lower entitlement; there will be twice as many gainers as losers in that category. This reform will reduce child poverty, because we are spending huge sums of additional money at a time when money is tight. We are doing so because of our priority of making work pay.

We have heard discussion of the real-time information system, the fact that people’s benefit will be based on their current situation and the impact on business. This approach has been assessed as saving businesses £300 million a year. Those figures are signed off not by us, but by the Regulatory Policy Committee, which is a business-led organisation; they have been validated by business. Businesses are doing a lot of these calculations anyway, with the software doing it for them in most cases, but the streamlining of the system will save businesses cost overall. We are working closely with our colleagues at Her Majesty’s Revenue and Customs; there has been close working between the two departments. The Department for Work and Pensions is represented in the governance of HMRC’s real-time information programme at every level, and the DWP and HMRC have jointly presented to Parliament.

The right hon. Member for Birkenhead, in another bizarre, overstated allegation, said that there has been a mass exodus of senior civil servants on the programme. That is completely untrue. The senior responsible officer, Terry Moran, whom he will know from years gone by, has held that role since November 2010. The programme director has been in place since August 2011. At HMRC, the senior responsible officer for the real-time information service has retired—we still allow people to retire, even under our policies—but has been replaced by someone from the DWP. So the suggestion that people are just walking out the door is nonsense and is scaremongering.

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I have only got two minutes, so I had better not give way.

We were asked about the position on domestic violence, an important issue raised by my hon. Friend Nicola Blackwood. It is an important issue in respect of provision for splitting payments, for example. The Government are absolutely committed to protecting those who are subject to domestic violence. For example, under universal credit victims of domestic violence will be exempt from things such as work search requirements for a three-month period. Although shared payments would normally be appropriate, because we know that most households budget together, clearly we will make alternative arrangements in exceptional cases. We have therefore retained powers to split payments between members of a couple, for example, in cases of domestic violence. Details of those exemptions will be included in guidance.

We heard a large number of contributions and I cannot do justice to them all, but the key theme from Government Members has been a unified view that we must make work pay and that we should not listen to the naysayers. Frankly, it is always possible to get a newspaper headline by saying “Big Government IT project bound not to work”, because if it does work nobody will ever remember. That is always the way in which the Opposition conduct themselves, but we are in the business of making things happen. When my right hon. Friend the Secretary of State explained how closely he monitors the programme, he was not exaggerating. This project has probably had more hours of testing, evolution and making things work than any other with which I have been associated.

Yvonne Fovargue mentioned the 1988 benefit changes, which were a “big bang” change. Income support, supplementary benefit, family credit, the family income supplement and housing benefit were reformed all on a single day. This is a roll out over four to five years and we will get it right by doing it gradually, testing it, having pathfinders and bringing in groups one step at a time. We all saw what happened under the previous Government to the tax credit system when the changes were done in a “big bang”, but we will make this change gradually, get it right and make work pay, so we should reject the naysayers and reject the motion.

Question put.

The House proceeded to a Division.

Photo of Dawn Primarolo Dawn Primarolo Deputy Speaker (Second Deputy Chairman of Ways and Means)

I ask the Serjeant at Arms to investigate the delay in the No Lobby.

The House having divided:

Ayes 230, Noes 297.

Division number 62 Universal Credit and Welfare Reform

A majority of MPs voted against publishing the business case for the “Universal Credit” scheme.

Aye: 230 MPs

No: 297 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Absent: 118 MPs

Absents: A-Z by last name

Question accordingly negatived.