Nigel Mills
It would be very optimistic to assume that the application form will take half a minute. I have not seen the form, but I have not seen any Government form that takes half a minute for a long time—[Interruption.] Does the Minister wish to answer the question?
The Minister of State, Department for Work and Pensions (Mr Mark Hoban)
I think we must be careful and not underestimate where people are at the moment. The vast majority of claims for jobseeker’s allowance are made over the telephone and an increasing proportion are made online. We are not entering uncharted territory and I am surprised that Opposition Members seem keen to keep us in a luddite past. We need to tackle the digital divide, and this is a very good way of doing it.
Nigel Mills
I am grateful to the Minister although I am not sure we got an idea of how long the application form will take to fill in. Perhaps we will get that later.
Nick de Bois
The right hon. Gentleman is absolutely right to make that point.
Nick de Bois
I will give way to the Minister, who no doubt will want to answer the right hon. Gentleman’s point, in a moment. I do not want us to set a tone that will undermine our overall goal, but of course if the shadow Secretary of State has concerns, he should raise them. I am sure the Minister is keen to answer them.
Mr Hoban
The shadow Secretary of State has been touting this story for months. [Interruption.] No, it has been longer than that. The last outing was in today’s Guardian. I want to make it clear that nobody has walked off the project; all the contractors are in place and the project is on schedule to be delivered at the end of April. Now, if he thinks the idea is good in theory, it is about time he supported it. It is working and the contractors are in place, doing the job and ensuring that the pilots will be up and running at the end of April.
Nick de Bois
I am glad to have spirited into being some Front-Bench dialogue.
Richard Drax
I agree with the shadow Minister. When I was a soldier, the great cry was, “Hope for the best and prepare for the worst.” I am a little concerned that, on this policy, the worst has perhaps not been prepared for. Will the Minister, when he sums up, reassure us that there is a system in place that will cope?
In dealing with the inevitable snags, community care grants and crisis loans could be administered by the local departments if this computer system were rolled out to them. The local housing benefit departments in my constituency are already running down their offices, yet their local knowledge could be invaluable in administering universal credit. In the world of IT and computers, how often have our constituents rung a telephone number and got a disembodied voice saying, “If you want flowers, press 1. If you want somebody else, press 2. If you want to go to heaven, press 3. And if you don’t want to bother us at all, press 4.”? At that stage the person wishes they had slammed the phone down and they give up the will to live. Although I welcome IT—I am not a luddite in that sense—I am a great believer in the human touch. Nothing beats eye-to-eye contact with constituents, including, as in this case, the many who need help. If people lose that contact with human beings—leaving aside the distress that will be caused if the computer system goes down—there will be an awful lot of concern, particularly among the elderly, many of whom do not understand the system in any case.
Richard Drax
I take my hon. Friend’s point, but many people who are not of pension age are, like me, middle aged—shall we put it that way?
As we know, universal credit is also intended to go online. As we have heard from many Members on both sides of the House, that will be unfeasible for many and could result in many incomplete applications. Again, local offices equipped with universal credit software might be a great help at least until the system is up, running and proven.
Another of Mr Hodder’s concerns is about the receipt of a single lump sum payment once a month. Although most of the population—75%, I believe—receive their salary once a month, and although we want to treat everyone in this country in an adult fashion, it is pragmatic to realise that many of the people who will receive quite a lot of money in one blow are not necessarily in a position to handle it and have not been accustomed to it. Welfare recipients are currently paid out of many pots and money comes in at different times of the month, possibly to different accounts and different partners. For example, child benefit is often paid to the mother.
Management of a single lump sum payment is likely to prove challenging for many, at least at first. Mr Hodder suggests, and I concur, that payments should be split into two a month to lessen the stress of managing day to day. He also points out that that would make recipients less of a target for payday loan sharks, as the monthly benefit salary would not be so large. I believe that there will be a rise in the number of those sharks, who will prey on those who get their money one month, spend it and then want more money to pay off their bills. The problem will therefore be increased. The money will also often go to one member of the family. If the husband is abusive, for example, there will be a problem if the wife does not have access to the money and it all comes in one lump.
Mr Hodder’s main concern is the proposal to include housing benefit, which was once paid to landlords, in that monthly lump sum. Mr Hodder’s view, with which I agree, is that there is a “huge risk” of non-payment to landlords—I think that that is a pragmatic and realistic fear—because of wilful non-payment or the inability of the tenant to manage funds over a month. He says that the impact on his association and others will be a rise in arrears and collection costs. They will need more staff, the cash flow will be reduced and there will be less investment in social housing. Private landlords are already saying that they will not take on tenants who get their money first, for obvious reasons, so that could also shut the door on the private rented sector. Further down the line, arrears could lead to more evictions, more clogged-up courts and more families being thrown on the mercy of local authorities, which are charged with accommodating them in emergencies.
In my view, those are all unintended consequences, but the human cost means that they matter even more. This ambitious shake-up is bound to cause some problems and I think we all accept that there will be some. Mr Hodder, I and many people to whom I have spoken believe that they could be mitigated by careful forward thinking.
The intention of universal credit is to make the benefits system more streamlined and efficient. I think that we would all agree with the principle that incorporating some of Mr Hodder’s suggestions would give it the best possible start. I hope to hear from the Minister that some of those concerns, expressed by Members on both sides of the House, will receive some answers. I also hope that the Government will consider very carefully all that has been suggested.
The Minister of State, Department for Work and Pensions (Mr Mark Hoban)
I commend the Chair of the Select Committee, the hon. Member for Aberdeen South (Dame Anne Begg), for the way in which she opened the debate, and for the balanced way she set out the issues in its report. I thank the Committee, too, for its work. Often, people outside the House underestimate the important role that Select Committees play in scrutinising policy development, but the report is a very good example of the excellent work they do to highlight the issues and to get the balance right.
Balance was what was missing from the speech by the right hon. Member for East Ham (Stephen Timms). I think there was a 10-second acceptance at the start that universal credit was a good idea. He then spent the rest of his speech trying to conjure up reasons why it was not a good idea. [Interruption.] No, that is absolutely true. I will give some examples. He and the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) have been touting for some months now the story that people have been walking off the project and that the project is in chaos. We saw it in today’s Guardian—an article that perhaps should be seen in the context of today’s debate—and the right hon. Member for East Ham said just now that he expected contractors to walk off site. What a load of rubbish we have heard! In a statement today, HP, one of the big contractors, said that it remained committed to supporting the DWP, to the universal credit pathfinders going live in April 2013 and to subsequent releases. It also said that it would continue to work with the DWP and our other suppliers on this major programme of welfare reform.
Stephen Timms
I can reassure the Minister that the source of the report came from the companies concerned. But let me ask him this: the initial plan was for all applications for out-of-work benefits to be handled as universal credit applications from October this year. Is there a new date for that milestone, and if so, what is it?
Mr Hoban
Yet again, the right hon. Gentleman needs to get some perspective. We have always made clear our plan for a progressive roll-out of universal credit, for exactly the reason that hon. Members have mentioned, which is that previous Governments have launched unsuccessful big-bang IT projects. We have been clear, therefore, that we need a progressive roll-out—pilots, lessons learned, consolidation and then next-stage roll-out.
That is the best way to ensure that universal credit is rolled out correctly and it is a significant change from how previous Governments have handled IT projects, including the disastrous tax credits system when, of course, the right hon. Gentleman was a Treasury Minister. We have made clear our plan for a gradual roll-out for new claimants from October 2013. We have always said that the progressive roll-out of new claims across the country would begin in October 2013. That is a simple restatement of what we have always intended to do. I respect the right hon. Gentleman, but I think he has overreached himself on this argument.
Mr Hoban
No, all the right hon. Gentleman is doing is scaremongering, which is not the right approach. Someone made the valid point that misinformation undermines claimant confidence in the system. I want to address some of the concerns that people have expressed in this debate and demonstrate how the Government are tackling the issues highlighted in the Select Committee’s report.
Mr Hoban
I am not going to give way. The more often the right hon. Gentleman seeks to intervene, the less time I have to engage with the substantive discussion.
I will remind the House of the aims of universal credit. It is designed to avoid universally recognised problems in the current flawed system, which traps people on benefits and makes them dependent on the welfare state. It will ensure that work remains the best route out of poverty and benefit dependence for those who can work, and is intended to be radically simpler than the complex web of tax credits and benefits it replaces. We made a deliberate choice here. My hon. Friend the Member for Leeds North West (Greg Mulholland) was right to highlight a previous Committee report on the complexity of the welfare system. Rather than replicating the current system, in all its complexity, we are seeking to design a system that is easier for claimants to understand and creates better incentives.
Crucially, universal credit brings together in-work and out-of-work support into a single monthly payment for those out of work or on low earnings. At present, there are separate systems for out-of-work and in-work benefits administered by different national and local agencies. A move into work therefore entails a recalculation of entitlement, multiple communications and possible delays and gaps in payments. As a result, many people are not prepared to take the risk of moving into work.
This is not just about those who are out of work, however; it is about those who are in work as well. One of the rigidities built into the tax credit system is the 16-hour-a-week rule, which means that people offered work have to ask themselves, “Is it worthwhile my taking on this additional work?” Many people have to go to the jobcentre to make a better-off-in-work calculation. We cannot have barriers in place preventing people from wanting to earn more, take on more hours and look after themselves and their families.
With universal credit, we are aiming above all to achieve a fundamental change in attitudes to work, helping people to see more clearly that they are better off in work and encouraging and supporting people to move into work or to increase their hours.
As I said earlier, too many people are trapped into working 16 hours a week by a system that means there is no point in extending their hours because they would be worse off. I have even heard of people turning down bonuses from their employers because they are concerned about the impact on their benefits. What a tragic situation we are in, when a system of benefits traps people in low incomes. What we need to do—I hope Opposition Members will reflect on this—is find a system that helps people to get back into work. That is one reason why it is important to have in-work conditionality, to help people move up the income scale and find ways to increase their earnings by getting new skills, getting promotions and increasing their hours. In focusing on how we resolve some of the exceptions in the system, Opposition Members are in danger of losing sight of the reason for doing this: to free people from a complex system of benefits that has trapped so many out of work.
Stephen Timms
I am most grateful to the Minister for giving way. He was not able to give a date for the earlier milestone; he is now setting out the advantages, as he sees them, of universal credit for people who are in work. To begin with, all new in-work benefit applications were going to be universal credit applications from April 2014. Can he tell us when that new milestone will be reached?
Mr Hoban
We have always said that there would be a progressive roll-out of the system. I am not going to give a running commentary on the timetable at this moment. We have been very clear—[Hon. Members: “Ah!”] No, we have been very clear that we would have early implementation in April 2013, and we are going to see that in the Greater Manchester and Cheshire area. That will enable us to test the end-to-end process in advance of the progressive national roll-out of universal credit from October. Once a pathfinder has happened, we will continue to adjust the exact timing and sequence of the migration process in the light of experience, including the operation of the pathfinder service in the Greater Manchester area. That will be done exactly to avoid the problems that previous Governments have faced with big-bang system changes falling over.
I would also point out to hon. Members who continue to question the Department’s ability to deliver significant system changes that we have launched the latest generation of the child maintenance system on time and on budget. We have also successfully launched the universal jobmatch service, which is helping more than 1 million jobseekers find work and get into employment more quickly. That we have been able to do those things demonstrates the Department’s capacity and capability to deliver programmes on time.
Kate Green
Even if things work entirely to plan and universal credit proves to be easily accessible and simple to use for the majority of claimants, we know that some of the most vulnerable claimants will be unable to make claims unassisted. They will go to an independent advice agency such as Welfare Rights or Citizens Advice for help. Can the Minister assure me that those agencies will be able to contact the Department easily with queries? They already struggle in the present system to find a dedicated helpline that can help them as advisers. Can the Minister confirm that that will be put in place and will work effectively for adviser agencies under universal credit?
Mr Hoban
I want to return to the question of support and advice agencies, because the need to support people on to universal credit is an important issue that has been raised. Before I do that, let me talk about a couple of other issues that people have raised in this debate.
A number of hon. Members have raised the issue of online access. We should recognise that digital exclusion is a major issue affecting communities and individuals. It acts as a barrier to employment, as well to claiming universal credit. We need to lift that barrier and make it easier for people not just to claim universal credit, but to get the online and digital skills they need to get into work. Universal credit gives us an opportunity to move people online.
Mr Hoban
I have only just started making this point, so let me make a bit more progress.
Research suggests that 92% of advertised vacancies require applicants to have basic IT skills. Therefore, those without such skills are considerably limited in their employment prospects. By using the digital channel as the default, we will be able to identify individuals who are struggling to manage or who lack the basic skills to use online systems. In doing so, we will be able to target support so that they can learn these essential skills, thus improving their prospects of finding work. Work done by the Cabinet Office on internet usage demonstrates that 78% of existing benefits and tax credits recipients already use the internet. Our latest figures show that more than 51% of jobseeker’s allowance claims received by the Department are now made online. I think that that demonstrates that people will be able to do it. We need to encourage more people to go online and find ways to give that support. For those who cannot use the internet, telephony and face-to-face access will be available. Rather than accepting that people cannot use the internet, we should try to help them get on to it and use telephony and face-to-face access as a fall-back mechanism.
The hon. Member for Bishop Auckland (Helen Goodman) said that 10% of people do not have access to superfast broadband with a speed of more than 2 megabits per second. She will be pleased to know that people will not require broadband at that speed in order to access universal credit and make claims.
Dame Anne Begg
The Minister might not know the answer, but will there be a real person at the end of the telephone, or will people have to enter all their details by pushing buttons and never get to speak to anyone?
Dame Anne Begg
In my experience of the disability living allowance, it takes some time to speak to a real person because the caller has to push lots of buttons, and that in itself acts as a barrier.
Mr Hoban
I have about 15 minutes left and am keen to deal with some of the other points that have been raised.
On advice and support, the advice sector is key to ensuring that we deliver universal credit effectively. We work very closely with the stakeholder organisations to ensure that their expertise is utilised. This is a moving picture and several things have happened since the Government published their response to the Committee’s report. On 11 February, we published the local support services framework, which addresses what support UC claimants need, including those with complex needs, and how we will work with the third sector and local authorities to provide that support in the most effective way.
At the heart of the framework is a partnership approach, which emphasises the need for close working between DWP, local authority managers and service providers such as social landlords and charities to agree on the services that will be needed at a local level. By encouraging close partnership-working between agencies, we will provide a more joined-up, holistic service for claimants with complex needs and a single claimant journey towards greater independence and, wherever appropriate, work readiness for claimants.
The hon. Member for Stretford and Urmston (Kate Green) asked about access. We have not decided yet whether there should be specialist advice line for welfare rights advisers, but we will try to bring together all benefits guidance in one place—I think it is a legitimate criticism to say that it has been fragmented in the past—and provide a much more simplified resource for relevant information. I hope that will make life easier for advisers in the third sector. I take on board the hon. Lady’s helpful point.
A number of hon. Members raised the issue of monthly payments, including the Chair of the Committee and my hon. Friend the Member for Amber Valley (Nigel Mills). Universal credit is designed to reflect a world where 75% of employees are paid monthly. Paying universal credit monthly will not only reflect patterns that people who fall out of work are used to, but help smooth the transition into work and encourage claimants to take personal responsibility for their finances. For the first time, we will be able to identify those claimants who struggle to manage on a monthly salary, and will provide support to help them develop the necessary money management skills to remove barriers that prevent some of them from moving into work.
We recognise that a move to a single monthly household payment is a significant change to the way in which many benefits are currently paid and that some claimants will require support to help them manage that change. Money advice will be offered to all claimants when they make a claim, and given to those who have a clear need for it. There will be different levels and types of money advice, based on need. Some claimants will be signposted toward an online service, some might be offered a single session over the phone, and others might be offered an intensive face-to-face session with follow-up calls. We also recognise that some clients might need money advice for only a short period, while others will need it for longer. We are trying to create a service that can be tailored to the needs of individuals, rather than a one-size-fits-all service.
On 11 February, we published guidance giving details of the factors that advisers should consider when discussing alternative payments with claimants. Those factors include drug and alcohol dependency. For most claimants, alternative payment arrangements will be time limited, and offered alongside further budgeting support and help to move towards managing a standard monthly payment. I mentioned that drug and alcohol issues were one of the factors that should be borne in mind. Others include learning difficulties, mental health conditions, those in temporary or supported accommodation, perhaps including people who are homeless, those who have severe debt problems and those who are the victims of domestic violence. So a range of factors will be taken into account to determine whether a monthly payment should be made, or whether an alternative, more frequent payment would be in the claimant’s interest.
My hon. Friend the Member for Enfield North (Nick de Bois) made the point that this is all about boosting aspiration. It is about enabling people to manage their finances and to get into work, and we need to ensure that we have a system that meets mainstream needs but also supports the needs of more complex cases, rather than a scheme that is designed entirely around the needs of the exceptions. It is important to get the balance right.
Mr Hoban
I just want to say something about basic bank accounts. We have set aside £145 million to stimulate new financial products for universal credit claimants, and we are working closely with financial providers across the private, social and third sectors. We are continuing to consult those providers and other stakeholders about the arrangements for those products, and we will announce our detailed approach and requirements in due course.
The hon. Member for Edinburgh East (Sheila Gilmore) referred to the fact that we had discussed basic bank accounts when I was in my previous role. There is a real challenge involved. One of the final pieces of research produced by the financial inclusion taskforce identified that many of the people who did not have a bank account were those who claimed benefit, and that many people who had had bank accounts had ceased to use them. It is important to ensure that we put the right financial products in place, but we must also give people the support they need to manage their money so that they can remain banked, rather than dropping out and becoming unbanked.
Stephen Timms
The Minister mentioned people in supported accommodation. Does he have a response to the concern that I raised about women’s refuges and other supported accommodation, given that the definition in the regulations does not seem to be quite right? Can he give me any reassurance about continued support for people living in such accommodation?
Mr Hoban
The definition in the regulations will be the one that is in the existing regulations, and it has worked well so far. We are talking to women’s refuges and others to try to understand what has changed, and why the existing definition no longer gives the desired results. That is a matter that we want to continue to discuss.
We need to be careful when we talk about the direct payment of rent, because the vast majority of people have no problem paying their rent or their mortgage. My hon. Friend the Member for South Dorset (Richard Drax) has raised this matter. In one of the pilots, 92% of people paid their rent on time. Among the other 8%, some were underpayments and some were mis-payments, but not all were wilful non-payments. We have an obligation to try to move that 8% so that they can pay their rent on time and meet their obligations. Also, this change will encourage social landlords to think about the broader needs of their tenants—how they can find the necessary skills to get work, and get the necessary financial and budgeting support to manage their money more effectively—rather than just thinking about collecting the rent.
We need to ensure that the new system does not remove personal responsibility from everyone, while recognising that we will need to do something for those who are facing the greatest problems. We are working on that, and the pathfinders will help us to gain that knowledge. We want to make sure that the risks are managed and that landlords can request that the housing element is paid to them when the rent arrears trigger has been reached. These arrangements will be in place for some high-risk claimants from the outset until there is improved financial capability. In effect, we will start the shift to direct payments for claimants with the easier cases and then progress to the more difficult cases. The approach that runs through the roll-out of universal credit is to pilot things and understand the lessons to be learned to ensure we avoid mistakes in the future.
I am sure that I have already spoken for far longer than I should have done, but I think our debate has been important. I end by echoing the words of my hon. Friends who have contributed. We are talking about a change in culture. It is not just a benefit replacement exercise; it is about helping people back into work—making sure that they know that it is better to work than not to work, that it is better to work longer to earn more than to work fewer hours and earn less. We need to tackle some of the barriers to getting people into work, not just in respect of the complexities of the benefit system, but by enabling people to manage their money and to take responsibility for their finances and for their future.
Universal credit is a huge step forward in encouraging self-reliance, but we recognise that a number of people—not the vast majority of people—will need more support. The measures we have set out today and the way in which we have developed them, even from when we submitted our response to the Select Committee’s report, demonstrates this Government’s serious commitment to get universal credit right. It is by getting it right that we will have the best chance of getting people out of poverty.
Mr Deputy Speaker (Mr Nigel Evans)
Dame Anne Begg seeks the leave of the House to make a short response to the debate. With the leave of the House, I call her to speak.