Universal Credit - Question for Short Debate

– in the House of Lords at 1:35 pm on 21st December 2016.

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Photo of Lord Farmer Lord Farmer Conservative 1:35 pm, 21st December 2016

To ask Her Majesty’s Government what progress they are making in rolling out Universal Credit, and what assessment they have made of its impact.

Photo of Lord Farmer Lord Farmer Conservative

My Lords, I am delighted and grateful that so many of you are here to participate in this debate, the final flourish not only of 2016 but also of the Minister’s tenure at the helm of welfare reform. Perhaps others with a longer history in this place than I have will be able to recall similar moments. Even if not unique, it is still historically momentous that a Minister of State, who was such an important architect of the reforms for which he guided through the enabling legislation, will close the book on his ministerial career by informing this House of what has been achieved and what remains to be done. To cap it all, the noble Lord, Lord Macpherson of Earl’s Court, is making his maiden speech, to which I very much look forward.

At its simplest, universal credit rolls six means-tested in-work and out-of-work benefits—child tax credit, housing benefit, income-related employment and support allowance, jobseeker’s allowance, income support and working tax credit—into one. Even a rudimentary understanding of the implications leaves no doubt that universal credit is a genuinely big idea, a far-reaching reform that has the potential to effect a massive shift in the social and economic landscape of our country.

We are all aware that big ideas and massive shifts rarely, if ever, come from a clear blue sky, or from the efforts of a single political party or Government. The thinking behind universal credit can be traced back to the 1960s, when politicians from all three main parties—Conservative, Labour and the-then Liberals—began to grapple with the complexity and unfairness of the benefits system.

Half a century ago, we knew that low-income families could be better off on benefits than in work, and thereby caught in a dispiriting and pernicious poverty trap. Various measures such as family income supplement, family credit and then an array of other tax credits were adopted to ameliorate this by a string of famous names in politics: Sir Keith Joseph, Kenneth Clarke, Peter Lilley and then of course Gordon Brown.

Although the financial circumstances of many low-earners were improved significantly through the incremental changes introduced, we eventually ended up with a highly complex system comprehensible to very few. One former stockbroker with several children who claimed tax credits described it as utterly impenetrable. The interaction of several benefits and different withdrawal rates for each meant that the marginal gains from work could be quite slight, not cover costs such as travel and be insufficient to de-risk the process of having one’s family’s benefits recalculated, with the pauses in payments that it entails.

Inadequately responsive annual assessments led to under and overpayments which could be of significant magnitude. The latter were to reach 9 billion by the time the coalition Government came to power. This did not just mean a huge dent in the public finances but thousands of families with worrying levels of debt that many had not knowingly incurred but were expected to repay.

Tackling this complexity was certainly on the “to think about” if not the to-do list of the previous Labour Government. A certain David Freud was asked to review their welfare-to-work programme, and his 2007 report included a chapter floating ideas for a single working-age benefit. The concept was revisited the following year in a Green Paper from the Work and Pensions Secretary, James Purnell, who was, according to the Institute for Government’s Nick Timmins, a single benefit advocate.

However the risks of change—the complexity and uncertainty that lives would be better as a result of making the shift—ultimately deterred the Labour Government from taking the plunge. It is far too easy to criticise those making decisions and carrying the very onerous daily responsibilities of government. However, there is an irony here that their inactivity mirrored on a macro scale the decision of many individuals who might have wanted to make a shift into work or increase their hours appreciably to refrain from doing so because they were not sure life would be better on the other side.

So it is very much to the credit of the coalition Government that they took up the concept of universal credit, rigorously argued in the Dynamic Benefits report from the Centre for Social Justice. I would here refer noble Lords to my entry in the register of Members’ interests. This was at a time when taking any risk with public finances would have seemed foolhardy, had it not been so desperately needed. Perhaps the profound economic shocks of 2008 were actually decisive in creating the appetite and conditions for change. It became impossible to pretend all was fundamentally well in our financial affairs. Universal credit was an idea whose time had finally come.

Social policy theorists Gyu-Jin Hwang and Hugh Heclo have explained how,

“‘new’ ideas can become influential in times of uncertainty when the dominant paradigm faces a crisis. … what is new is the heightened attention they receive within policy-making circles as decision makers search for new ideas that can help solve the crisis. … ‘politics finds its sources not only in power but also in uncertainty – men”— and women—

“collectively wondering what to do”.

Simply put, hard times force you to innovate.

However, if dampening uncertainty is one of the underlying aims of universal credit, evaluating its impact on that, even though it is rather harder to measure than actual numbers in employment, is imperative. Can the Minister explain whether and how the psychological effects of universal credit are being studied? Do claimants feel more in control of their own and their families’ futures? Is there a greater sense of optimism? Crucially, is the stigma associated with being on welfare reduced under universal credit?

Obviously, behavioural changes are also very important to track: 86% of people on universal credit are actively looking to increase their hours, compared with just 38% of people on jobseeker’s allowance; and 77% of people on universal credit are actively looking to increase their earnings, compared with just 51% of people on JSA. This augurs well for the Government’s intention to move people up the scale in terms both of pay and hours worked, and out of needing universal credit at all. But how successful are job coaches at ensuring in-work progression actually happens?

Also, there is no doubt that one major challenge to starting afresh with the benefits, system which caused previous Ministers to baulk—and understandably so, given the short- termism that plagues our political system—was the length of time that design and full rollout would require. The Minister has often talked about the test and learn approach this Government have taken to welfare reform. I am encouraged, as a businessman who, like all of your Lordships, wants good government and sound management of the public finances, that an agile approach to this very large project was adopted, albeit eventually. My impression is that we have learned invaluable lessons for future large-scale projects by taking the time to get this right. However, this has also meant taking a damaging amount of political flak for the significant delays universal credit has encountered. Can the Minister explain to the House what contingencies and other factors are built into the latest timescales so that the public can have full confidence that they will be met?

Finally, I want to offer my sincere congratulations to my noble friend Lord Freud for defying the maxim that all political lives end in failure. He is leaving office after securing the future for the reforms he has spent over a decade working—unpaid—to deliver. However, I cannot quite believe it really is the end of this exemplary public servant’s political life. Certainly he will not be leaving the House of Lords and he is entitled to remain on the Front Bench as a privy counsellor. So, I am choosing to believe it is the end of a successful chapter, with much of the book yet to be written. We wish him a very happy, healthy and productive retirement.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Shadow Spokesperson (Work and Pensions) 1:45 pm, 21st December 2016

My Lords, I start by saying that we too look forward to the maiden speech of the noble Lord, Lord Macpherson of Earl’s Court.

This debate is both our farewell to the noble Lord, Lord Freud, as well as an update on universal credit. Its dual purpose is fitting because there can be few other examples in recent times of the engagement of a Minister being so inextricably and consistently linked to a single piece of social policy, and one where the operation and policy development has been driven by that Minister—and a Minister who stuck with it while others around him have abandoned ship.

Universal credit, as we have heard, started life with a great deal of support—certainly ours—as being a single income replacement benefit for working-age families that would simplify the system, incentivise work and progression in work. The original plan was for claims to legacy benefits and tax credits to cease by April 2014 and for all existing benefit and tax credits to be transferred to universal credit by October 2017. That is now to be 2021. It interests me because, on inquiry over the months, it was always seemingly on time and on budget. It expected to lift 350,000 children and 600,000 adults out of poverty.

At Second Reading of the 2012 Bill on welfare reform, the noble Lord, Lord Freud, was dubbed Che Guevara for his revolutionary zeal, although we prefer to see him as Captain Kirk of the “Starship Enterprise” boldly going where no man had gone before, notwith-standing a few black holes and some warp factors.

A reference to warp factors brings us to the Treasury, whose malign influence has significantly changed the design of universal credit. A range of cuts has been imposed on the project since first proposed and changes to the work allowances in particular, according to the IFS, which has shaved—an interesting figure—5 billion per year off its long-term cost. Overall, universal credit will cut benefit expenditure by 2.7 billion a year in the long run with 3.2 million households seeing a reduction in their means-tested benefits, and 2.2 million an increase. Incentives to work have been substantially watered down. The IFS projects that there will be 1.3 million more children in relative poverty in 2020-21 than in 2014-15. We have not yet had the Government’s assessment over that period.

As CPAG points out, there is continuing pain still to be inflicted by the two child limit, removal of the first child premium, the continuing freeze on most elements of the benefit and the continuing twist of poverty being inflicted by monthly payments and waiting days—part of the original design, of course—not to mention sanctions.

However, the hope is that in the future, with a different Government, the original intent of universal credit might be restored, and for creating and embedding an architecture which would allow this, the noble Lord, Lord Freud, deserves full recognition. We wish him well earned rest.

Photo of Lord Kirkwood of Kirkhope Lord Kirkwood of Kirkhope Liberal Democrat 1:50 pm, 21st December 2016

My Lords, the noble Lord, Lord McKenzie, is quite wrong in characterising the noble Lord, Lord Freud, as the Captain Kirk of universal credit. He is the Mr Spock of universal credit and that is how I will always think of him. I too am looking forward to the contribution of the noble Lord, Lord Macpherson of Earl’s Court. He might tell us where we can find some money in future to deal with some of the problems.

I have been an enthusiastic supporter of the concept of universal credit since the heady days of 2008 and Dynamic Benefits; the noble Lord, Lord Farmer, was right to recommend that because it was a very ambitious policy. At that stage it was a poverty reduction programme. What we are scaling up in the next few months is, unfortunately, a scaled-down poverty reduction programme —but it is still the right thing to do, because when it works it is transformational. I have seen it work; the conditions have to be right for it to work and, in many parts of the country, these conditions are not in place. That is why the debate proposed by the noble Lord, Lord Farmer, this afternoon is particularly relevant.

I want also to pay tribute to the noble Lord Freud, for the intelligent way in which he introduced test and learn into the 2012 Act. It is progressively an innovation that could pay real dividends if his heirs and successors make positive use of it, which I encourage them to do.

We are looking at the progress of the rollout of the policy. All I have time to do is to list four areas of concern that I did not foresee in 2012 when we passed the Act. The first I do not need to spend a lot of time on, because I am delighted to see that the noble Baroness, Lady Donaghy, is speaking further down the list. She has been a doughty fighter in terms of the needs of the self-employed community, which has increased enormously since 2012. I would bet a monkey to a mousetrap that she will spend all of her three minutes on that subject, and I do not need to say any more—except to say that, if we are not careful, that cohort of the working-age population will slip into the grey economy, which is in no one’s interests.

In passing, I note the hollowing out that has occurred in local government since 2012. The safety net provision of universal credit locally delivered is embedded in local government. There is no capacity to do that properly—and I was reminded of that by our recent visit to Coventry with some colleagues, where we looked at a properly run and good authority struggling very hard to make things work.

Thirdly, there is the question of sanctions, which I am sure will be raised by other noble Lords in the course of the debate. Sanctions are essential to the proper prosecution of this policy, but they have to be appropriately applied. A gentle nudge is a work incentive; a sledgehammer sanction is counterproductive and costs the public purse more in the long run.

Finally, I would have looked differently at the 2012 Act if I had known that we would be withdrawing from the European Union, which will be detrimental to the poor in this country. We have to find resources to make more generous the thresholds and tapers in future—and I hope that the noble Lord, Lord Macpherson, will show us how to do that in the course of his maiden speech.

I hope that the House will return to these matters. I want to say to the noble Lord. Lord Freud, that I have been working in this policy area in both Houses for 30 years, and there have been two Ministers who have made a significant difference in this social policy area—and actually they are both Conservatives, which you might not expect. Tony Newton was one and the noble Lord is the other; he has made a lasting difference, and it has been a privilege to work with him. I wish him well in future and look forward to his contributions as this policy develops.

Photo of Baroness Jenkin of Kennington Baroness Jenkin of Kennington Conservative 1:52 pm, 21st December 2016

My Lords, I remember visiting the Hammersmith Jobcentre Plus three or four years ago, with other noble Lords, including the noble Lord, Lord Kirkwood, accompanied by my noble friend Lord Freud for a briefing on universal credit and to see the new system for ourselves. We spoke with frontline UC advisers, most of whom had previously been jobseeker’s allowance advisers, to find out more about their experiences of the new system. We were all impressed by what we saw and heard.

The coaches whom we talked to felt that universal credit fostered a more positive relationship with their customers, that it gave advisers more flexibility, and that it was already changing the culture of Jobcentre Plus away from a focus on off-flows to employment outcomes. These front-line advisers in Hammersmith said simplification works in practice, and that UC has helped to remove what they called the “drama” of the benefits system. The existing benefit system is complex, involving multiple agencies, applications, processes and rules, and affects the relationship between the adviser and the recipient. Rather than spending a lot of time trying to explain different elements of the system, advisors have time to support their customers to find work. This led to much more positive relationships and more rewarding work for advisers. They had far more flexibility and job satisfaction than when working on jobseeker’s allowance, and the new claimant commitment is bespoke and customer-led and it allows them to include a range of activities not traditionally classed as job-seeking but which help to remove barriers to work. Examples included attending an appointment with the local authority housing team, co-located in the building, to deal with the problems of rising arrears and avoiding homelessness; it also included watching a YouTube video on interview techniques.

My other memory of that visit is of my noble friend’s incredible grasp of the detail, something which we in this House are so well aware of, and his genuine commitment and care for those who find themselves struggling to navigate the complexities of the old system. I bumped into the noble Baroness, Lady Hollis, yesterday who said how sorry she was not to be able to speak in this debate today. I expect that my noble friend wishes that she had not been available to speak in a number of previous debates during his six and a half years in the job. I know that many of us have felt intimidated by her detailed knowledge of the brief. I, for one, have felt on occasion like a 16 year-old First World War fighter pilot up against the Red Baron—or the Red Baroness on this occasion—but I was struck by her comments to me. She said, “I am a fan of the noble Lord, Lord Freud. He has always been available to talk things through, and his door has always been open”. We have been lucky to have him as Minister and we will miss him enormously.

Photo of Lord Stevens of Kirkwhelpington Lord Stevens of Kirkwhelpington Crossbench 1:55 pm, 21st December 2016

My Lords, I congratulate the noble Lord, Lord Farmer, on introducing this timely debate. I look forward to the maiden speech of the noble Lord, Lord Macpherson of Earl’s Court.

According to the original concept of universal credit, which I think that most of us here would support, it should be delivered in 2021. However, various promises have been made over the years which have not been kept. In April 2014, it was said that 1 million people were subject to this scheme. It was then discovered that only 14,000 were part of the scheme. Understandably, something as vast as this takes time to introduce and should be gradual, but the problems with the IT system, which is way over budget, and the promises made that have not been kept, do not give total confidence that this can proceed in the way that we wish. The fact that the noble Lord, Lord Freud, is not there to give his guidance and understanding is also an issue, although I am pretty sure that his successor will take up the cudgels in this respect.

Is not this an opportunity in terms of timescale to look at some of the lessons that have been learned over the years, as the noble Lord, Lord Farmer, illustrated? Something that has been talked about is the clear benefit of decentralising some issues in relation to this measure. Surely there need to be face-to-face benefits of consultation at jobcentres, especially in relation to those people who have serious problems—vulnerable people, victims of domestic violence and disabled people. It may well fly in the face of where the provision is directed to, but if we look at the lessons that have been learned, some of them well documented, surely this issue should be considered. The fact is that most vulnerable people are at the mercy of the progress of this new IT system, but I believe—and I hear this from people who know more about this than me by far—that proper consideration of staffing as this programme is rolled out and keeps progressing will minimise the risk to vulnerable people. I hope that those issues and lessons are being thought about and addressed now. There is nothing wrong in going back to the original intentions of universal credit, but I am sure that it is important that lessons are learned, and that IT lessons are learned. In this House, we have all experienced difficulties with IT systems.

I wish the Minister good luck. I do not know whether to refer to him as Captain Kirk, Spock or even the Red Baron—but one thing is for sure, Minister, you have done an outstanding job. The things that I have heard are that your door is always open, you always listen and you are always very gentlemanly in dealing with anything that comes your way. Thank you for that.

Photo of Lord Shinkwin Lord Shinkwin Conservative 1:59 pm, 21st December 2016

My Lords, I join in thanking my noble friend Lord Farmer for securing this timely debate. For me, perhaps the two greatest strengths of universal credit are its simplicity and flexibility, which my noble friend Lady Jenkin has already identified. Indeed, I have been struck by how much those two characteristics have been singled out for praise—for example, by the recruitment agency Blue Arrow and by individuals whose testimonies to the Department for Work and Pensions I have read.

It occurs to me that Parliament is so often seen as a place where we tear bits out of each other, although, of course, never in your Lordships’ House. I wonder, therefore, whether it is all the more important that we give credit where it is due. By credit, I do not mean just the approximately 1,800 Parliamentary Questions that the House of Lords Library estimates my noble friend has answered, or the approximately 400 Statements that he has made, or even the countless hours he has enjoyed at the Dispatch Box during his time as a Minister since 2010. No, what I mean by credit is his record as a proud Conservative social reformer, who, along with Iain Duncan Smith, has translated the vision that work must always pay into reality, and as someone who has recognised that identifying the political imperative on its own is not enough. That is because the political impetus is also essential—the impetus that translates a vision from recognising that a policy is necessary to seeing it being implemented and rolled out. That requires political will. Therefore, there is much that we can, and should, learn from my noble friend because the Freud model of government so obviously works. Change is actually happening, and in the face of systemic inertia and, I suspect, sometimes denial that change is even necessary. That is surely a remarkable achievement.

I believe that just as the Disability Discrimination Act was the Conservatives’ greatest social reform of the 20th century, so universal credit will come to be seen as one of the Conservatives’ greatest social reforms of the 21st century. We should take pride in both and look to draw on my noble friend the Minister’s example of applying the political will and the drive so essential to implementing and rolling out our political and social reforms, whether that be universal credit, or, indeed, the Disability Discrimination Act—both matter. We should also appreciate that only when we roll them out and they are fully implemented can their benefits be fully realised. Surely that will represent a fitting and lasting tribute to my noble friend the Minister.

Photo of The Bishop of St Albans The Bishop of St Albans Bishop 2:04 pm, 21st December 2016

My Lords, I too thank the noble Lord, Lord Farmer, for this important debate. On behalf of these Benches, I take the opportunity to thank the Minister for his very considerable contribution, drive and service to this House, and wish him well as he leaves the Front Bench.

I think it is true to say that very few in this House disagree with the stated aims of universal credit—to simplify the benefits system and ensure that work always pays. However, I also suspect that there are quite a few of us in this House and, indeed, on these Benches, who fear that on occasion Her Majesty’s Government may have lost sight of that aim. Indeed, it seems that successive cuts to the welfare budget have been prioritised as an easy way of balancing the Government’s finances.

The Chancellor’s decision to lower the taper rate of universal credit in the Autumn Statement indicates a welcome change in the direction of travel, but that concession does not go far enough. It is cuts to work allowances that have most seriously undermined universal credit as an effective incentive to increase working hours, and only a restoration of those work allowances will see the credibility of universal credit restored. As the Centre for Social Justice has suggested, slowing or scrapping the Government’s commitment to increase the personal tax allowance would be the most obvious way of paying for an increase in work allowances, and would be a far more effective way of assisting hard-working families most in need of support. With more people in employment than ever before—that is a great thing—it is vital that the welfare system gives part-time workers an effective incentive to increase their working hours.

I want to make a further brief point about the loans made available to claimants in financial difficulties when direct payments are not available. It is crucial that people are made aware of, and are able to access, universal credit advances as soon as they apply for universal credit, given that they could be waiting for up to seven weeks for their claim to be processed. Access and awareness around hardship payments are also vital when an individual is sanctioned, as well as swift processing. Anything else will leave people quite literally going hungry, and that is not something we should be willing to accept in modern-day Britain.

Photo of Lord Hodgson of Astley Abbotts Lord Hodgson of Astley Abbotts Conservative 2:06 pm, 21st December 2016

My Lords, I add my thanks to my noble friend Lord Farmer for giving us the chance to debate this important topic. I would like to take the first of my three minutes to add my thanks and congratulations to my noble friend on the Front Bench for his sterling work across the whole field of welfare and social security reform. The role of a Minister in your Lordships’ House is not an easy one. Having mastery of a brief is essential. If not, another Member of your Lordships’ House will almost certainly stand up and put you right. However, mastery of the brief is not enough. Because of the make-up of your Lordships’ House—the make-up of the political parties and the presence of the Cross-Benchers—a successful Minister must know how to put a case across, not stridently and didactically, as that will not win over the uncommitted, but calmly and persuasively. My noble friend is a master at this and has been a centre of calm reasonableness, no matter how strong and fierce the criticisms.

I turn to universal credit. Many Members of your Lordships’ House will know of my involvement in the charity and voluntary sector. One of the areas where charities play a major role is in getting people back to work. Work in the charity sector can be an important first step in recovering self-confidence and learning to live with the disciplines of the workplace.

Charities and voluntary groups used to tell me about the two main drawbacks of the pre-existing system. The first was its complexity and the fact that a multiple range of benefits, some of which overlapped and some of which required quite sophisticated form filling, were a major challenge—the impenetrability issue to which my noble friend referred in his opening remarks. The second was the way that benefits were withdrawn as the individual began to earn, which led to perverse disincentives to work only so long and no longer, and to earn so much and not more because of the way the system worked. For me, the universal credit plan offered a way to tackle these two challenges, and in large measure it appears to be succeeding. Have there been setbacks which have necessitated changes? Of course, there have. Indeed, the noble Lord, Lord Stevens, referred to one. But with a wholesale change in approach covering 5 million to 6 million households, it would have been a miracle if the system had proved pitch perfect from the outset. However, overall, the system seems to be working, and working well. Perhaps the final link in the chain will be to improve the help offered to those who are less confident and experienced in dealing with a primarily online approach. But overall this has been a success, and one on which the Government, and especially my noble friend, should be congratulated.

Photo of Baroness Donaghy Baroness Donaghy Labour 2:10 pm, 21st December 2016

I thank the noble Lord, Lord Farmer, and the Government for enabling this end-of-term Christmas show to pay tribute to a man who looks as amiable as Bob Cratchit—and whom I sincerely hope history will not judge as Scrooge. A Minister who actually understands his brief is regarded as a clear and present danger to his own side. The Opposition know that he has the confidence to make changes where they make sense and do not harm the overall project. His is one of the most complex and heavy areas of work, and he steered it through for six whole years on the Front Bench. In prison terms, that must make the noble Lord a long-termer.

During the debate on the then Welfare Reform Bill, I tabled an amendment about exempting industrial injuries benefit from the benefit cap. The noble Lord said in reply:

“My Lords, I will not make any promises on this but I will have another look at it. That is the weakest of possible promises. In fact, I am trying to say that it is not a promise at all”.—[Official Report, 23/11/11; col. GC 428.]

However, he delivered on this, and I was eternally grateful.

Others will be able to speak much more coherently on the other aspects of universal credit. I still think that including housing benefit was a huge mistake, and administering universal credit is extraordinarily complex, but it is not my intention to rain on today’s parade.

The noble Lord will probably know that my ignorance of welfare matters was total. When asked to participate in the debate, I explained to the noble Baroness, Lady Hollis of Heigham, that I had worked for 40 years and my expertise was in the world of employment. She immediately replied, “That’s excellent—you can deal with the self-employed”. I buried myself in this world and must have bored the Minister rigid with my analyses. I like to think that if the Treasury had allowed him, he would have been more flexible with the problems of the low-paid self-employed. I promise him that I will continue to pursue this.

Finally, I have to say something about the Mesothelioma Act 2014, which would not have existed without the noble Lord, Lord Freud. I took part in the debate as a tribute to the trade union movement, which campaigned to get mesothelioma recognised as an identifiable disease. Arising from the Act, an oversight committee was set up and I was invited to chair it. We oversaw the paying of 26 million last year, and the noble Lord should be extremely proud that claimants and their families will at least have some anxieties removed as a direct result of his actions.

I hope the noble Lord does not object if I conclude with a limerick. For the benefit of Hansard, the second line is “cold-water warrior”—I would not like it to be set down as “Cold-War warrior”:

“There was a long-termer named Freud,

A cold-water warrior who toyed

With a system that groaned

And a Chancellor who moaned,

And to his universal credit, he deployed—partially”.

God bless us, every one.

Photo of Baroness Thomas of Winchester Baroness Thomas of Winchester Liberal Democrat 2:13 pm, 21st December 2016

My Lords, I well remember the maiden speech of the noble Lord, Lord Freud, on the Autism Bill of 2009. In it, he said:

“The approach presaged in the Welfare Reform Bill would allow us to find the very considerable resources necessary to transform the lives of those adults with autism. It would do so despite the very difficult times that we are facing, when the economic pressures on spending will inevitably be severe”.—[Official Report, 10/7/09; col. 892.]

Universal credit was welcomed, as others have said, with its mission agreed across all parties to simplify the payment of benefits, and to create work incentives and earnings progression. The noble Lord played a key role in keeping universal credit on the road when there were rumours that it was about to be scrapped. But the Treasury, which is not getting a good press this afternoon, is outside anyone’s control, it seems. It has done its best to dilute universal credit so much that its mission may have to be completely reset if it is to be anything more than a vehicle to rationalise the payment of benefits.

So, is UC beginning to transform the lives of those with autism and other vulnerable adults, particularly those with learning difficulties or disabilities? I asked the National Autistic Society and my colleagues in Sutton, south-west London, who have embraced the full digital rollout of UC, to answer this question. The answer, I fear, is not looking good. Vulnerable adults who have to make a new claim for UC and who have not yet been through the work capability assessment will have an interview at the jobcentre with a work coach. Unfortunately, work coaches are not trained to deal with people with autism or learning difficulties. I am told they work from a script, mostly with no variation from it.

So what about support for vulnerable adults, particularly the tailored support we were promised? Luckily, in Sutton the local authority is stepping in— at the moment—to avert a real crisis, but this will not happen in many local authority areas around the country as there is no funding to support it. Would the DWP consider allocating more resources to local authorities for claimant advocates to tide them over this transitional period when full digital rollout takes place, so that thousands of vulnerable adults are not plunged into confusion and debt? The other problems include delays in payment, and alternative payment arrangements for housing costs, which are for a set period, suddenly ending, leaving many claimants confused.

When UC is working as it was originally designed to, it is a fitting legacy for the noble Lord, and we can only hope the current problems will not last. I wish him very well in the future.

Photo of Lord Macpherson of Earl's Court Lord Macpherson of Earl's Court Crossbench 2:17 pm, 21st December 2016

My Lords, I feel very fortunate and indeed honoured to be speaking for the first time in your Lordships’ House. I am grateful for the very warm welcome I have received in recent weeks, my Treasury origins notwithstanding. I would like to thank the extraordinarily helpful staff of the House, who have initiated me into its more arcane mysteries. I would also like to thank my supporters, the noble Lord, Lord Layard, and my noble friend Lord Stern of Brentford. Both are internationally renowned economists. Both have worked on labour market and poverty issues, and I have learned a great deal from them.

I recently left the Treasury after 31 years. One of my first posts there was on social security at the time of the Fowler reforms, whose eponymous author is now Lord Speaker. I worked on his admirable plan to replace family income supplement with family credit. Later, I worked for Ken Clarke on seeking to extend family credit, and I had the great privilege of working for Gordon Brown, leading the work on the new tax credits at the turn of the century, when I also worked with the noble Baroness, Lady Sherlock, among others. I was also Permanent Secretary when Mr Duncan Smith announced his plans for universal credit in 2010.

I see successive reforms to income-related benefits as very much an evolutionary continuum, informed by evidence and experience. And although each change has rightly been subject to vigorous debate, not least on what constitutes a fair and affordable level of benefit, each reform, in its own way, has been successful. Our country has one of the most dynamic and flexible labour markets in the developed world, and we should celebrate that.

Of course, it is too early to tell whether universal credit will achieve its objectives, but I welcome the fact that, as a concept, it has cross-party support, and that digital technology at least in principle is making options possible which were previously unthinkable.

I hope to come back to the issues raised by universal credit in future debates, not least to respond to the challenge of the noble Lord, Lord Kirkwood: how to finance improvements to universal credit. For my part, I would advocate spending a bit more on income-related benefits for working-age people, perhaps at the expense of the very large amounts that are now going to pensioners. However, for the moment, I shall confine myself to one observation.

The delivery of universal credit has been a long and expensive journey, and it is not over yet. When the dust has settled, I hope, like my noble friend Lord Stevens, that we can learn some of the lessons. I fear that the original timetable was overly aggressive; that capacity, at least in the early years, was inadequate; and that, with hindsight, the department and the Treasury could have worked better together.

In the meanwhile, the nation should be hugely grateful to the noble Lord, Lord Freud, who has done a fantastic job. He has devoted six years of his life to the cause, and that is public service indeed.

Photo of Baroness Stroud Baroness Stroud Conservative 2:20 pm, 21st December 2016

It is an honour for me to follow the noble Lord, Lord Macpherson. I congratulate him on his maiden speech and welcome him to this House. His contribution to the topic we discuss today is huge. As he said, he was PPS to Gordon Brown as he created the tax credit system, and then Permanent Secretary to George Osborne throughout the introduction of universal credit. The care that he gave to steering the Treasury through the financial crisis at the same time as undertaking the biggest reform of welfare in a generation is highly commendable, and we look forward to seeing his wisdom and experience, benefiting us all in this Chamber.

But today is important for a second reason. There were many days when I doubted that we would discuss the progress of universal credit, so the title of this debate alone is a source of huge encouragement to me. However, it is also a day when we celebrate another heroic effort. It is an extraordinary feat to be a Minister in one department for six years; it is still another to leave at a time of one’s own choosing.

As my noble friend Lord Farmer has already said, my noble friend Lord Freud disproves in one easy stroke the old adage that all political careers end in failure. He has stayed long enough at the coalface to ensure success. The story of universal credit is the story of real courage, sacrifice, endurance and painstaking policy work, and much of this story belongs to him.

In 2008-09, when we were developing the concept of universal credit at the Centre for Social Justice—I refer to my entry in the Register of Members’ Interests—there were key dynamics that we wanted to be built into a reformed welfare system. We wanted to ensure that it encouraged more people into work and made work pay, smoothed the transition into work, making the choice to take work a logical choice, and tackled poverty through increased reward from being in work.

The rollout of universal credit was not a smooth one, as my noble friends Lord Freud and Lord McPherson can attest to, but we now have a silent revolution taking place. Universal credit claimants now spend around 50% more time on job searches than comparable JSA claimants, they earn more than similar JSA claimants and they move faster into work.

However, given that universal credit is rolling out successfully, and given that it is Christmas, I want to finish my few allotted minutes with my Christmas wish list for universal credit. I was one of the first to congratulate Theresa May and the Chancellor on their choice of investing in universal credit and beginning the pathway to reversing the cuts to work allowances. I encourage them to use each Budget and each spending review to continue investing in the work allowances and taper. That is the best way of supporting those who are just about managing.

Secondly, there is one more step to take with childcare in universal credit. If you are on a higher income outside of UC, you can claim the tax-free childcare offer for as many children as you have. That is not the case for universal credit claimants, although with an investment of about 50 million it could be. Thirdly, a strong and continued commitment to universal support, extended beyond financial and digital inclusion to include family, mental health and skills support, could provide the safety net that vulnerable people need.

Many people on all sides of this House are committed to the successful rollout of UC. We thank our noble friend Lord Freud for staying at the coalface long enough to ensure safe passage for this hugely significant reform, at significant personal cost. We reassure him that his efforts have not been in vain but that we will continue, as a House, to safeguard this reform.

Photo of Baroness Lister of Burtersett Baroness Lister of Burtersett Labour 2:25 pm, 21st December 2016

My Lords, I too am grateful for this opportunity to mark the huge contribution made by the noble Lord, Lord Freud, to the design and implementation of universal credit. However, I doubt that the Minister will be surprised that my three minutes will not just be made up of warm words, because reports from the ground are not encouraging.

One of the biggest problems is the combined effect of a seven-day waiting period and monthly payments in arrears, which, after assessment, means that the first payment is not made for at least six weeks. This is causing considerable hardship and is leading to reliance on food banks. Monthly payments also create unnecessary difficulties for those—especially mothers—who just about get by when budgeting weekly or fortnightly. They are not essential to UC’s architecture and I urge the Government most strongly to look at them again.

I am particularly concerned about the implications for those granted refugee status, who are given only 28 days to move from asylum support to mainstream benefits. This is already a problem, with too many left destitute because 28 days simply is not long enough, and, by definition, it will not be enough time under UC. Welcome as the Home Office/DWP pilot is, it cannot solve that problem. A related problem is refugees and other vulnerable claimants who are unable to claim because they do not have any form of bank account, despite the assurance given in a recent Written Answer that this does not prevent a UC claim. Again, I urge Ministers to look into this.

Universal support delivered locally is supposed to be the answer to the more general problems created by monthly payments. However, I am told that it is functioning pretty minimally now. The evaluation of the trials found that the,

“most significant challenge in delivering personal budgeting support was that ... participants simply did not have enough money each month”.

Well, that challenge is going to get harder with the lower benefit cap, the two-child limit and the benefits freeze at a time of rising inflation.

Moreover, the universal credit that the Minister is bequeathing his successor is not the one that he championed through your Lordships’ House because of the cuts in work allowances, which we have already heard about and which bear the fingerprints of the Treasury. Even the Minister’s former boss, Iain Duncan Smith, has made a powerful case against this cut, pointing out that work allowances are a much more cost-effective mechanism for helping the just about managing than are personal tax allowances—a point also made by the right reverend Prelate. Of course, the Minister could not possibly comment but I hope that, once he has stepped down, he might feel freer to do so.

Nick Timmins described the Minister as,

“the last political figure to understand, in full technicolor, the gory details”, of UC. The DWP has been very fortunate to have someone of his ability committed to it. I hope that those who follow will learn from his experience and will be willing to look again at the emerging problems. I am very encouraged that the noble Lord, Lord Macpherson, made clear in his valuable maiden speech that he will be taking part in those debates—and I should mention that I have no prejudice against his Treasury background.

As for the noble Lord, Lord Freud, we may rarely have seen eye to eye in exchanges in this Chamber but I am grateful to him for his courtesy and openness outside it, and I wish him all the best for his well-deserved retirement.

Photo of Baroness Manzoor Baroness Manzoor Shadow LD Spokesperson (Work and Pensions) 2:28 pm, 21st December 2016

My Lords, I thank my noble friend Lord Farmer for securing this timely debate, and I congratulate the noble Lord, Lord Macpherson, on his excellent maiden speech.

The universal credit system is one of the most radical reforms since the welfare system was set up 100 years ago. Today, as we have heard, is the Minister’s last day on the Front Bench, and I therefore take this opportunity to thank him for his tenacity, drive and commitment in ensuring that UC, despite the many challenges it has faced, has continued to progress and develop and to be rolled out successfully across the country, despite some of the delays. He has played a key part and leaves behind an important welfare reform legacy, and I congratulate him.

UC is, of course, the integration of six means-tested benefits and tax credits into a single payment. It simplifies and streamlines a complicated benefits system, along with improving its transparency, accessibility and accountability. It is worth remembering how far we have travelled. In 2010, the country was spending 4 for every 3 we were earning, the welfare bill had ballooned to unsustainable levels—9 billion, as we have heard—and in-work poverty had increased to 20%. To address this, the UC system is designed to make it easier for people to move in and out of work, and it removes the benefit trap by tackling the financial disincentives to entering the workforce. This is to be applauded as, unacceptably, two-thirds of children in poverty live in working families. This must change.

UC is rightly designed to lift working adults and their families out of poverty by encouraging more people into work and ensuring that work always pays. However, had the cuts to tax credits gone ahead, they would have undermined this cornerstone policy. The Government must ensure that the effects of UC working allowances do not have a similar impact or unintended consequences; for example, discouraging single parents from working more hours. As we move forward and the reforms bed-in, the Government must be ready to act to ensure they are not in danger of cutting the very aspect of UC that creates a work incentive.

In the meantime, UC is showing that people are taking up more employment and remaining in employment for longer than when compared with jobseeker’s allowance. In the first nine months, 71% of UC claimants moved from welfare into work with the help and support of Jobcentre Plus work coaches, and of course there is also the offer of help with 85% of childcare costs.

My noble friend Lord Freud leaves behind a huge, incentivising welfare-to-work agenda and a welfare system that must continue to be seen through the prism of work. He leaves a strong legacy for his successor to build upon, and I wish him and UC well for the future.

Photo of Baroness Warwick of Undercliffe Baroness Warwick of Undercliffe Labour 2:32 pm, 21st December 2016

My Lords, I thank the noble Lord, Lord Farmer, for securing this important debate. I too pay tribute to the noble Lord, Lord Freud, soon to retire from his ministerial role. He has been instrumental in developing and delivering universal credit. I also want to offer my condolences to the noble Baroness, Lady Jenkin, on the sad loss of her father-in-law, whom I worked with years ago and whom we all respected in this House. Of course, I congratulate the noble Lord, Lord Macpherson of Earl’s Court, on a very witty maiden speech.

I declare an interest as chair of the National Housing Federation, the trade body of England’s housing associations. Although I share some of the concerns expressed by other noble Lords, particularly my noble friend Lord McKenzie and the right reverend Prelate the Bishop of St Albans, I want to focus on the role of housing associations in universal credit. Thousands of association tenants are eligible for universal credit and, over the past three years, the federation and sector have worked with DWP and the noble Lord, Lord, Freud, on the design and implementation of the pilot and then the rollout. We all support its principles of simplifying the benefits system and incentivising work. Housing associations have worked with the department to ensure that these principles are achieved and that unintended consequences are, I hope, avoided.

Our joint working has resulted in the setting up of a specialist team to tackle the challenges that housing claims entail. It has also improved the alternative payment arrangements system whereby the housing element of universal credit is paid directly to the landlord. These arrangements are vital for those who currently lack budgeting skills and would be at risk of going into arrears and losing their home. The sector is keen to help ensure that new claimants are protected by reducing the risk of arrears as much as possible. We know from the pilot that sharing information between DWP and social landlords is vital. It helps landlords take pre-emptive action to prevent arrears and gives DWP valuable claimant information. I understand that DWP is currently looking into an online portal to make this information sharing easy and free from bureaucracy. Associations would certainly welcome this, along with further information on timescales, and I wonder whether the Minister can give the House an update on progress. Similarly, associations would be keen for DWP’s “trusted status” pilot to be extended, allowing it to grant alternative payment arrangements before arrears build up. Again, that would reduce the risk of eviction and keep vulnerable tenants in their homes.

Finally, I want to emphasise the role that associations can play in helping to reduce the benefits bill and boost affordable homes. As I said in the debate on the Autumn Statement, associations could do more if given the freedom to set their own rents. I believe that both tenants and the Government would benefit from that. It would allow associations to better meet the needs of the communities they serve, improve affordability and therefore prevent upward pressure on housing-related benefits. Housing associations have proved to be helpful and trusted partners in the design and implementation of universal credit. Is the Minister prepared to build on this trust and support discussions to support freedom for the sector to set its own rents?

Photo of Baroness Eaton Baroness Eaton Conservative 2:35 pm, 21st December 2016

My Lords, I join other colleagues in thanking my noble friend Lord Farmer for providing the opportunity for this debate, and I congratulate the noble Lord, Lord Macpherson of Earl’s Court, on his excellent contribution to our debate this afternoon.

The fact that there are so many speakers for a debate which is last business before the Christmas Recess is a clear indication of the interest members have in UC and also the very high regard they have for the Minister. When my noble friend Lord Freud began his work on universal credit, I am sure he had clear in his mind the end product. I am sure he did not envisage the very difficult, challenging and sometimes painful path he would need to take to achieve the positive position we are in today. I know all Members of the House hold him in high esteem, not only for his clear far-sightedness but also for the gracious and patient way he has dealt with the barrage of questions, and sometimes even open hostility, he has received from some quarters.

We have heard from some Members of the remaining challenges that we face with UC. As the 16th speaker in the debate, I know that much detail has already been given and comments made, so I will not hold the House up by adding and repeating things. However, I would like to say that I was brought up in a household that believed very strongly in a work ethic, equally strongly in supporting those who suffer disadvantage, for whatever reason, and in the value of the welfare state as a safety net. The previous welfare system did not encourage a work ethic and did not work efficiently or effectively as a safety net.

One of the many aspects of the old system that I thought was dreadful was the fact that savings had to be run down fast if benefit was to be paid in full, as the system assumed that a ludicrous rate of interest was being paid on them. The system encouraged fraud. On some calculations, 200,000 more people were claiming tax credits as lone parents than actually existed. One of the groups most hit was childless adults under the age of 25, who were not entitled to working tax credits. NEETs aged 16 to 25 were included in this group. In my previous roles in local government, I worked with others on the plight of NEETs. The welfare system did little to help this vulnerable group.

Universal credit is revolutionising the welfare system by making work pay. It is already transforming lives, with those on universal credit moving into work significantly faster and working longer than under the old system. For the first time we are not only helping people into work but helping people while at work with personalised support. My noble friend Lord Freud believes passionately in this reform, into which he has personally invested much time and effort. We all owe him a debt of gratitude and wish him a relaxing and very fulfilling future.

Photo of Baroness Finn Baroness Finn Conservative 2:39 pm, 21st December 2016

My Lords, I begin by thanking my noble friend Lord Farmer for securing this timely debate. I also congratulate the noble Lord, Lord Macpherson, on an excellent and incisive maiden speech. The noble Lord was among the very best of officials and we all appreciated his dry wit as well as his brilliant mind. I also pay tribute to my noble friend the Minister, whose dedication and public service ethos have been beyond compare. There are few who were better qualified to be the Minister for Welfare Reform, having advised the Opposition while they were in government and the current Government while in opposition. My noble friend Lord Freud’s nearly seven years in government have seen the fruition of the universal credit programme.

Perhaps my noble friend’s greatest achievement was to help secure cross-party support for the policy of universal credit. Previous Governments ducked the challenge of implementing such an ambitious programme and certainly more than one official told me that it simply could not be done. It would be fair to say that there were issues with, and glitches in, its implementation during the coalition Government. However, the fact that the policy itself enjoyed full political support was crucial. The implementation and rollout of universal credit posed enormous challenges for which the Department for Work and Pensions was unprepared and with which it was ill-equipped to deal. It is to the enormous credit of my noble friend the Minister, my right honourable friend the former Secretary of State, Iain Duncan Smith, and my noble friend Lady Stroud that they persevered in the face of such difficulties.

The Public Accounts Committee report into the early progress of universal credit in 2013 was fairly damning of the “extraordinarily poor management” of the programme and the approach of the officials responsible. Astonishingly, the department was first alerted to the problems due to,

“concerns raised in a supplier-led review, commissioned by the Secretary of State, which reported in July 2012”.

It was therefore the Secretary of State and his red team review that alerted his officials to the problems—rather than the other way around, as ought to be the case.

For this, Iain Duncan Smith deserves rightful commendation as he refused to accept the blandishments of officials who kept reassuring him that all was fine. As a result, the universal credit programme was reset, using the latest digital technology, and, as many noble Lords have explained, it is indeed starting to transform lives. I urge that the policy stays true to its original purpose and continues to carry incentives to ensure that work will always pay.

My noble friend the Minister deserves credit not only for establishing support for the universal credit policy but for his dogged determination to ensure that the policy is properly implemented. As all of us who bear the scars of government know, moving the government machine and getting things done are not easy tasks. It is remarkably hard work. To have achieved the successful implementation and rollout to date of universal credit is a tremendous achievement and formidable legacy.

Photo of Baroness Bakewell of Hardington Mandeville Baroness Bakewell of Hardington Mandeville Liberal Democrat Lords Spokesperson (Work and Pensions) 2:42 pm, 21st December 2016

My Lords, I draw noble Lords’ attention to my entry in the register of interests. I also thank the noble Lord, Lord Farmer, for securing this important debate and congratulate the noble Lord, Lord Macpherson, on his maiden speech.

The universal credit rollout has been methodical across the country. My home town Yeovil’s rollout is due in April 2017 and the district council and other agencies have been working together to ensure that the transition runs smoothly. There are, however, problems as DWP is not sharing information in a way that would assist the process.

The issue of the introduction of the two-child limit was raised by the noble Lord, Lord McKenzie of Luton, and is extremely important. It is vital that safeguards are in place to protect children of rape victims and kinship care where short-term transitional arrangements could make a huge difference. I hope that the Minister will be able to reassure the House.

Turning to discretionary housing payments, guidance has been issued that households on universal credit that have a managed payment to landlords arrangement should not be awarded DHP unless the MPTL is ended. That is worrying as those in receipt of such an award are, by definition, people who have difficulty paying their rent, and the removal of a managed payment will clearly put those payments at risk. A single parent with very young children subject to the benefit cap, with a managed payment but with no DHP, could be left with no money to live on.

The availability of discretionary housing payments was a key argument which the Government used to justify extending the benefit cap to vulnerable groups who are unable to work. Restricting their availability in this way substantially undermines this defence. I ask the Minister to look at this with some urgency. I also draw attention to the six-week waiting period that has been raised by other noble Lords. We have evidence from Citizens Advice that this is leading to increased rent arrears and food bank use. In South Somerset the offices are holding small stocks of food, petty cash and vouchers to assist those in really desperate straits. For low-paid workers struggling to be independent, having frequently to use a food bank is disheartening in the extreme. In modern day Britain it is a disgrace that we all share. While our donations to the food banks are welcome, it should not be necessary in one of the wealthiest nations of the world.

Lastly, I take this lighter opportunity to pay tribute from the Liberal Democrat Benches to the contribution that the noble Lord, Lord Freud, has made to the transformation of the benefits system and the work of the DWP. It is certainly not a role where you can please all of the people all of the time. However, the noble Lord has engaged with all sides of the House in a genuine and open fashion. I remember in my early days being part of the organised visit referred to earlier to Hammersmith jobcentre, which was instrumental in the early rollout of universal credit. The noble Lord’s knowledge of the subject was striking, as was his empathy with those claimants who were going to be among the first to transfer to universal credit. His commitment and integrity were clear and he will be a very great loss to the government Front Bench. We wish him well in his retirement and hope that he has a relaxing Christmas—for he has certainly earned it.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Opposition Senior Whip (Lords) 2:46 pm, 21st December 2016

My Lords, I welcome the noble Lord, Lord Macpherson, to the House. It was a real pleasure to work with him in the Treasury, albeit of course in wiser and gentler days. It was a characteristically thoughtful and measured maiden speech. Perhaps his long view enables us to look on something like the developments in social security today as evolution rather than revolution. If he is right, I fear that the students of the world will have to tear down their pictures of the noble Lord, Lord Freud, which had previously replaced the ones of Che Guevara and perhaps look at something in future that is a little more Darwinian in evolution. I cannot tell noble Lords how frustrating it is to have three minutes to talk about universal credit: I could talk for 33 minutes, but I will not. I have three brief comments and will then say a word about the noble Lord.

First, on the principles and architecture, we on these Benches have long supported the idea of universal credit and a combined benefit. It is not in the end a principle, but a delivery mechanism to get money to households based on need and circumstance. Its key advantage should be the ability to smooth transitions in and out of work, while having a single taper can be used to ensure that work pays and that claimants benefit from any increase in pay or hours. But there are some structural issues that still need addressing. The key one is that it was a real mistake to let DCLG take council tax benefit outside universal credit. Doing that and then cutting it and localising it means not least that DWP cannot ensure that work pays because it does not know how much council tax support any individual will get, especially if they get disability benefits. That was flagged up during the passage of the Welfare Reform Bill as were other issues that are now causing problems. We have heard about paying monthly in arrears leading to six-week delays and real hardship and the decision to pay rent direct to the landlord causing real problems for tenants and some landlords. There were also significant issues for second earners for whom work is disincentivised, for self-employed people and real issues around in-work conditionality. But all of that could be changed: it is not structural, so I hope that it will be.

Secondly, the levels of UC payments are a problem. They were cut before it was even implemented and have been repeatedly since. Universal credit was meant to be more generous than the tax credits that it replaced, but it is now a net gain to the Treasury, which may explain its more recent enthusiasm for it. UC was of course designed to lift 350,000 children out of poverty, but it now cannot do that, because if levels simply are not high enough to raise people out of poverty, it cannot do that job. Crucially, it was meant to make work pay. Instead, the taper-free work allowance has been halved unlike with tax credits. Reducing the taper from 65% to 63% does not begin to compensate. The original taper was meant to be 55%, which really could have made work pay. Sadly, I am sorry to say that the Treasury axe has so damaged universal credit that at the moment it cannot do the job that it was born to do. Work is no longer the route out of poverty and simply saying it does not make it so.

Finally, I will say a word on delivery. UC is a great idea, but it is a great idea only if it is deliverable. If it cannot be delivered, it is a terrible idea, so I am afraid that I have to say a word about delivery. I feel really mean going on about this during the swansong of the noble Lord, Lord Freud, but it has to be said. I cannot allow a debate on universal credit to go through without mentioning that it is years late, that hundreds of millions of pounds have been spent on IT disasters, that there are widespread complaints about delays and errors, and that sanction rates are sky high—and all this is before current claimants with complex cases and repeat changes of circumstances move across. I fear that it could then get worse. I hope very much that the new Minister will find an opportunity for us to discuss these issues at greater length when we come back in the new year. Universal credit can and should make work pay and tackle poverty, but it will not do so without change.

But that is not for the noble Lord, Lord Freud, to worry about. His job is done and the House should acknowledge his absolute determination to get the structures of universal credit in place, including his willingness to stand his ground and to fight his own department, the Treasury and DCLG when necessary. My friends used to report to me periodically about turning on the television to find footage of the noble Lord, Lord Freud, and I doing battle on late night Parliament TV, and they would often say, “Why do you keep shouting at that nice man?”. It is true that we have battled over various policies for many years, from the bedroom tax to disability benefits. Some issues we must flat out disagree on, but with others such as the cuts to universal credit, and I suspect the two child policy, I always thought that the Minister’s heart was not really in his arguments.

But whatever the issue, some things may not be evident from outside the House: that the noble Lord, Lord Freud, has been unfailingly courteous to me and to all of us on these Benches. He has been generous in giving us access to his officials and he has done the House the courtesy of almost always coming here himself to defend his policies rather than sending a Whip. He usually seeks to defend his arguments by engaging with us and using evidence rather than just repeating the government line. When we convinced him in debate, he would go back to his department, push, and then sometimes return with real concessions. We may disagree on policy and I think that we will carry on doing so, but the noble Lord, Lord Freud, has been a loyal public servant of integrity. The House and the country should be grateful to him. I hope that we will see him in the House again very soon, but only after he has had a well-earned sabbatical.

Photo of Lord Freud Lord Freud The Minister of State, Department for Work and Pensions, The Minister of State, Department for Work and Pensions 2:51 pm, 21st December 2016

My Lords, I start by congratulating my noble friend Lord Farmer on getting this debate. I do not know what Houdini-like skills he has to secure this timing, but it clearly shows that he knows how to operate the House systems. I also congratulate the noble Lord, Lord Macpherson of Earl’s Court, on his maiden speech. He has a lot of knowledge of this area which he will be able to contribute to the House. Lastly, I add my condolences to my noble friend Lady Jenkin of Kennington.

My private office tells me that I have made 3,331 spoken contributions in my time as the Minister for Welfare Reform, and this is the last time that I will speak in that capacity. I thought that it would be most valuable if I concentrated on two things: the lessons we have learned from the process and what we can see for the future of welfare reform. Universal credit marks a fundamental change in the relationship between the state and citizens who are claimants. I think that it is more than a Darwinian process. This is quite a substantial change in approach that puts progression into work at its heart. The original systems were often designed to protect people from work when it was industrial and hard, so that was what we wanted to do. It never proved possible to move the whole system away from that approach, so it is universal credit which is introducing that real dislocation.

It has been much harder than I thought it would be and it has taken longer. However, I remain utterly convinced that putting this machinery in place is the right thing to do. The purpose is simple. One wants a system where those who are in it can see the benefit of taking control of their own lives rather than be constrained from doing things simply by the shape of the benefits system. Let me talk briefly about an element referred to by my noble friend Lord Shinkwin, which is the flexibility of the system and how it can be used to improve the productivity of the country. That is being done by removing the hours rules in the existing system as well as simplifying the system so that people are able to understand it. Picking up on the point made by the noble Lord, Lord McKenzie, there are various incentives to work, one of which is the work allowance, but the level of the taper is another. It is, I hope, interesting to noble Lords to see that at a time of full employment, which on the figures is virtually where we are, one can play with the taper to try and bring progression into the system rather than look at encouraging people to get into work in the first place. One will be able to play those changes in the years to come a bit like the tax system is manipulated when one wants to achieve particular things.

The area into which the noble Baroness, Lady Donaghy, has been particularly successful at putting her probe is that of self-employment. She has genuinely got me going back and worrying about making sure that our self-employment support is right. We started off with a fairly mechanical approach, but now in part as a result of the probing and warnings of the noble Baroness, we are looking at how to support people who are self-employed. I have had a cadre of work coaches trained up who understand small business and can begin a dialogue with people. We have also pulled the new enterprise allowance into the system. What we are looking at is not only how to have people who are self-employed, but how to help them be successful in their self-employment. I thank the noble Baroness, Lady Donaghy, for that. The fact is that the structure of universal credit works far better with what we are all calling the gig economy because it is more flexible, and that includes self-employment.

I turn to the lessons learned. Noble Lords will remember, some vividly, the reset in 2013. I can remember probably more vividly than most noble Lords the difference between the way that my colleague the right honourable Iain Duncan Smith was treated in the Commons at the time and how noble Lords in this House treated me. Two debates were held and the Hansard reports would make a reader think that they were conducted on different planets. There was real generosity in this House and an understanding of what we were facing, as well as cross-party support for what we are trying to do with this machinery. We differ on levels, but I think that we all agree on the machinery. At that point I felt very well supported.

However, there are real lessons in this. What I now think is that the change that government as a whole went through in outsourcing its IT, which happened in the 1990s and early 2000s, was a fundamental mistake right across the whole of government. I know that from the one example of the DWP. What it meant was that we lost control of our systems. People had been thinking about IT as a separate entity but it is not, it is part of the operation: lose control and an understanding of IT and one loses control of what one is trying to do. What we had to do was take our IT back in-house and to rebuild it, and the change has been quite dramatic. We have an integrated team of people on operations, coders, data architects and so on. It is one team; everybody has to be part of our team. I give your Lordships one of the most dramatic facts: for the first version of universal credit we used to have a release once every half year. We are now doing releases weekly. That is the difference.

The other thing—I was very conscious of this from my time as an adviser under the Labour Government—was that the operations people did not like to talk even to the policy people, let alone to the Ministers. I remember trying when I first came in to get the operations people to come back and complain when we stuck some structure down their throats. They would not. It has taken an awfully long time just to get the operations team to be the people who say what is working and what is not, and to turn it round.

The other thing that is really interesting—this is across government—is that an organisation of that size finds it impossible to deal with an abstract, conceptual notion. It cannot do it. Too many people have to have the same vision: you cannot get it when it is complicated. You have to get something on the ground that an organisation can shape itself round. It was an accident that we did it twin-track, but having that first track out so the organisation can get round something and start to get the lessons was, in practice, vital. This is the origin of what we have dubbed the test and learn approach: get something out, find out how it works and iterate the whole time. I am pleased the Government have now announced, somewhat retrospectively, that this is government policy. I can take pride in that one.

Universal credit is going ahead. I will not go into the detail; we have all discussed some of the figures. I will talk about the future a little. We now have a nice shiny system in the heart of our welfare system. There are a lot of things we can then put round it and make better. I have, in my last few weeks, set in train quite a lot of those. Some of them have just been locked down. I give your Lordships as an example how the supported accommodation system works. There is a system in train now for that. How do we get the disabled to really take the potential advantage and benefits of universal credit for them when, for instance, they have fluctuating conditions? That is what the Green Paper we discussed is all about.

Finally and almost most interestingly is the universal support system. We have never had a system of coherent support for vulnerable people. We have put in a system of universal support where we are in partnerships with local authorities for a couple of barriers: the digital barrier and their budgeting barriers. We discovered that that is a system we could expand and put more barriers in, so we can put people who are in debt, people with addictions and people with housing problems into that envelope, the point of which is that we can then share data within it so we start to have a coherent approach. That is a nascent structure that I think spells a way for us as a country, for the first time, to really help the most vulnerable people. The noble Lord, Lord Stevens, talked about that; the noble Baroness, Lady Thomas, is worried about it. My noble friend and co-conspirator Lady Stroud talked about it. Of all the things I hope grow out of the opportunity of universal credit, that is the one.

No one will mind if I go on a little longer. The other thing noble Lords did with me was put in something that allowed us to pilot things and see what would work best. We have the opportunity to optimise universal credit in a way no other country can. We can take a sample of people and change financial parameters; try different work allowances and tapers; and ask what the Laffer curve, if you like, is for the taper rate. We can do all that with small numbers, draw them and really know what the effect is. We may get to 55% taper—who knows? We will find out. We can do so because we have this incredible instrument of the real-time information link. We can tag people and watch what happens when we do something with them. This will take decades. In the end it will be a combination of financial incentives and conditionality, which one will need to optimise. I am sure that that will change for different groups and for different economic conditions. That is an invaluable tool for the future. We can do all that for some of the things noble Lords are concerned about, such as for the noble Baroness, Lady Warwick, on how we improve social housing, and how we sort out APAs.

I will stop now. I feel comfortable about leaving. It is a wrench to leave. It has been a long time, but I am comfortable to leave. To answer the noble Lord, Lord Stevens, I am comfortable because the basic system is there and rolling out. The organisation is transformed and able to do it. I leave it in good hands for the House’s purposes. I congratulate my noble friend Lord Henley on taking the job. He needs to learn to be very polite to noble Lords round the House. I close by saying something I have always wanted to say. There have been a lot of questions I have not been able to answer today, but I will not write.