The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)
My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State.
“Mr Speaker, I would like to make a Statement on the changes announced to universal credit in the Budget last week and on the managed migration regulations, which we are laying in the House today. The Chancellor announced a substantial package at the Budget to ensure that millions keep more of what they earn, and vulnerable claimants are supported when they move to universal credit. In total, this package will be worth an extra £4.5 billion across the next five years.
I want to say a special thank you to all the colleagues, charities, third sector organisations, Jobcentre Plus staff and claimants who fed back to me to build this package of support to ensure universal credit is a fair system, supporting thousands who cannot work, as well as thousands who can. I would also like to thank my right honourable friends the Prime Minister and the Chancellor for their support to deliver these measures.
Make no mistake: this is a department that listens and a department that will continue to listen, adapt, change and deliver. We will put an extra £1.7 billion a year into work allowances, increasing the amount that hard-working families can earn by £1,000 before universal credit is tapered away—providing extra support for 2.4 million working families. Of course, the Opposition do not like helping 2.4 million families, which is why they are laughing, because we help and support people into work. That is why it was welcomed not only in this House but among charities like the Child Poverty Action Group, which said:
‘The work allowance increase is unequivocally good news for families receiving universal credit’;
and the Joseph Rowntree Foundation, which said that this extra investment,
‘will help make Universal Credit a tool for tackling poverty’.
We have gone further, recognising the genuine concerns raised about the support we were offering people, especially the most vulnerable, when they move to universal credit. So we have made a further £1 billion package of changes, providing two additional weeks of DWP legacy benefits for those who move on to universal credit—a one-off, non-repayable sum that will provide claimants with extra money during the period before they receive their first universal credit payment. This is on top of the two additional weeks of housing benefit announced at Autumn Budget 2017, and put into place this year. We will also support the self-employed moving to universal credit. We will open up a 12-month grace period before the minimum income floor is applied, supporting 130,000 self-employed claimants, because we are the party of business—we are the party of aspiration.
We will support those in debt by reducing the normal maximum rate at which debts are deducted from universal credit awards, from 40% to 30% of standard allowances. This will help over 600,000 families to manage their debts at any one point when rollout is complete, providing them with, on average, £295 extra a year as their debts are repaid over a longer period. This is targeted support to help work pay and support the vulnerable.
That is why today I lay regulations to deliver the next phase of universal credit: managed migration, through which people will be moved on to universal credit. It is a move from a system that trapped people on benefits and created cliff edges at 16, 24 and 30 hours, with punitive effective tax rates of over 90% for some. Under Labour, between 1997 and 2010, benefit spend went up by 65%. In 1997, households were paying £5,500 in taxes to fund the benefits system, and by 2010 it had risen to £8,350. This party was voted into office to manage the country’s finances and get them under control, and to make sure that the benefits bill was affordable and sustainable for the future. So while the party opposite may hanker for the dark old days—trapping people on benefits, excluding them from the opportunity of work and getting on in life, while at the same time delivering a big bill to the taxpayer—we do not.
Under this Government 3.4 million more people are in work, the vast majority of which are full-time and permanent roles. That means that we have created more new jobs in the UK since 2010 than France, Spain, Ireland, the Netherlands, Austria and Norway combined, alongside creating a welfare system that supports those who need it.
Through universal credit, around 1 million disabled households will receive around an extra £100 on average per month through more generous support. The managed migration regulations will, in addition, protect 500,000 people’s severe disability premium at the point of migration, and will deliver transitional protection for those we move, to ensure that at the point of moving, those manage-migrated have their entitlements protected.
We will take a measured approach to delivering managed migration, taking our time to get it right and working with claimants to co-design it. We will continue to take on board the advice of experts and charities such as the Social Security Advisory Committee, whose report on the regulations we have published, along with our response, today. We have accepted in full or part all but one of its recommendations, and the one we did not accept is because we want to make it more generous.
I pay tribute to the hard work of the Social Security Advisory Committee in scrutinising our regulations. We have changed a key part of the regulations, which charities, MPs and the department have asked me about, which relates to the minimum statutory notice period for people moving from their legacy award to universal credit. We have extended this period from a minimum of one month to a minimum of three months, to allow claimants maximum time to prepare and make their claim before their legacy award expires. Alongside this, we have unlimited flexibility to extend claim periods for people who need it. We will also back-date any claimant who has missed the deadline date but who has made a claim within a month of the deadline day passing. We will also test a variety of communications methods, including advertising campaigns, face-to-face communication, letters, texts, telephone calls and home visits. This will provide support for claimants during managed migration. We will constantly review our approaches, engaging fully with charities, experts, claimants and all Members of this House. I commend this Statement to the House”.
My Lords, that concludes the Statement.
Baroness Buscombe
I begin by welcoming the comments of both noble Lords opposite, who have welcomed at least in part what we have achieved, both through the Budget announcements and the laying of the regulations today.
In response to the noble Lord, Lord Kirkwood, I say straightaway, up front, that unlike honourable Members in another place who did not seem to realise that we would be debating these regulations, we have—and want—to debate them. They are affirmative measures and we will debate them before the end of the year. Otherwise, if we do not get these regulations through, the transitional protection support for people will be lost; we have to make that very clear. I have pretty much put a date in the diary for my first session. I was going to alert noble Lords after our upcoming recess but, in fact, I will make sure that is sent out to all Peers tomorrow. I want to make sure that any Peer who would like a conversation has one with myself and the Minister of State for Employment—he wants to join me in engaging with all noble Lords. It is really important. We want the opportunity to spell out the detail of these regulations. We are excited about it, not least because we have listened and learned.
I have listened to the noble Baroness opposite; I know, for example, that she had a particular concern—as did the noble Lord—when we met to talk very briefly in private two months ago about what we were trying to do with the one-month minimum term to migrate claimants to UC. We have now moved that to three months. We decided on three months, rather than longer, because in talking to experts and stakeholders we decided that any longer might in fact be a disincentive and unhelpful to claimants. It felt as though it was too long a burden in front of them.
We want to do all we can to work with claimants, working with stakeholders—hence having this period now, after the full rollout of universal credit at the end of this year. We will be spending until July next year going through a test and learn process. Our process will be co-designed with stakeholders to ensure that we have listened and understood claimants’ experiences. We want a process that works well for everyone. We are focusing on building safeguards for vulnerable claimants and ensuring that we have all the necessary information to enjoy a smooth transition, with uninterrupted support.
I would say to the noble Baroness, Lady Sherlock, that we have decided that we do not want to do anything in terms of migrating claimants without face-to-face or online support because, when we did that, we actually got wrong what we thought would be a smooth, automatic transition from incapacity benefits to ESA—I am going back now to 2011. We got it wrong because we did not always have up-to-date information on people’s circumstances. We did what we call “pre-populate”, and we have decided as a department that that is too dangerous, in case we get it wrong again. We are talking about a huge number of people and we want to get it right.
Therefore, the test and learn process that we are going to go through before beginning the transition will be actually working with claimants who come forward to work with us, testing and trialling how we can make the process better. We have not yet developed the system for managed migration, for the very reason that we want to spend time with everybody: lab sessions, where we use researchers who have recruited claimants; pop-up testing, where researchers have visited job centres, and all the support organisations, homeless shelters and parent and child organisations, to talk to claimants and staff to get this right.
When we do start the managed migration process, we are going to migrate a maximum of only 10,000 people in the first year, which sounds slow, but we think that is the right thing to do. We want to spend all that time checking and making sure that we are right. I will be very happy to come back to your Lordships’ House to keep noble Lords informed of how that process is going, because it is absolutely important that we get it right. We are never going to get 100% of the cases right, but we will do our best.
The important thing is to explain that the two-week support is an additional payment. There will be no gap. That will help people to adjust from being paid two-weekly to four-weekly, but it does not represent any form of gap in transition in terms of payments. It is an additional payment, in addition to the two-week additional housing benefit—which, again, is a one-off cash payment to support people through the process.
I was asked what was meant by my right honourable friend in another place talking about what happens if claimants cannot migrate. We are of the opinion that we should keep the system entirely flexible, so that where a claimant has complex needs or is vulnerable, the work coach can have the option to suggest an extension of the deadline of migration, arrange a home visit or, to be entirely flexible, remove the claimant from the managed migration process entirely. We have to be careful that we do not allow people to fall through the cracks. Let us be clear that this one to three month minimum period is the minimum period for people to manage migrate, but we will be flexible, particularly with those vulnerable claimants who are having difficulty in migrating to the new system.
Baroness Sherlock
Before the Minister sits down, I think she may have inadvertently omitted to answer a couple of my questions. Could I invite her to check the record and write to me?
Lord Trefgarne (Con)
My Lords, can my noble friend confirm that these regulations will be presented to the Secondary Legislation Scrutiny Committee, to which the House normally delegates these matters?
Baroness Buscombe
Absolutely. We will make sure that these regulations will be part of the proper process.
Baroness Lister of Burtersett (Lab)
My Lords, I welcome the concessions in response to SSAC, and I think we owe SSAC and all the organisations that gave evidence to it a big debt. SSAC recommended that before the department starts the migration process it should undertake what it called a “rigorous and transparent assessment” including,
“how effectively Universal Credit … is currently operating”.
Given the Public Accounts Committee’s observation of,
“a culture of denial … in the face of any adverse evidence”,
how can we be confident that the DWP’s acceptance in principle of this recommendation will mean that, before managed migration, it really will tackle the design flaws that all the organisations on the ground are saying are preventing UC operating effectively? Following on from my noble friend, why will those who do not claim within one month of the new target date not get transitional protection, when Ministers constantly say that everyone will get transitional protection?
Baroness Buscombe
My Lords, let me make it clear that we are now in a very different place from when that PAC report was drafted. We are injecting an additional £4.5 billion into the system to support the migration on to universal credit. We are in a place where we are already spending £100 billion on benefits for people of working age; we have to think about sustainability and affordability.
When it comes to testing the system, we will adjust and amend our processes according to how claimants respond, which we will identify through ongoing user research with claimants, where we look to establish why claimants did not interact with the service and what they found difficult. We will use that to improve the processes. At the end of the day, though, we cannot leave the process entirely open-ended, where people for whatever reason do not choose to migrate. The important thing is that that is why we are having the whole preparation and learning process—to understand why there could be anyone who fails to go through the process or there is more than one month after the closure of when they should have applied to go on to universal credit.
We will be spending time and a lot of input into advertising campaigns; communications by text, phone and letter; and home visits. Those people will not be falling through the cracks without an extraordinary amount of effort on the part of our 83,000 employees at the DWP, who are not a department in any denial whatsoever. They want this to work. They are excited about it and work hard for it; they will help us to succeed, to the best of our ability.
Lord Framlingham (Con)
My Lords, can the Minister confirm that, due to the investment in work allowances, an extra 2.4 million families will keep an extra £630 per year of what they earn, by removing the taper rate from an extra £1,000 of earnings?
Baroness Buscombe
My noble friend is absolutely right. The measures in relation to work allowance will make an enormous difference to families. The measure directs additional support in a package worth £1.7 billion across Britain, to some of the most vulnerable, low-paid working families. If a single claimant has responsibility for a child or qualifying young person, or has limited capability, they currently receive a work allowance of £198 per month and those with housing costs £409. With universal credit, raising the current work allowances will mean direct additional funding to working families with children, and working disabled people, by allowing them to keep more of their earnings before the taper rate is applied.
Baroness Donaghy (Lab)
My Lords, the Minister will not be surprised if I focus on the self-employed. The Social Security Advisory Committee has acknowledged that the main concern about the self-employed was not the grace period, though it acknowledged that a small extension is welcome, but the principle of the minimum income floor itself. Organisation after organisation submitted evidence to the committee to say that this would not work. The committee requested that,
“the Department should undertake a robust evaluation of the policy and its operation ... It is important to determine whether it operates equitably, what effect it has on the self-employed themselves, and what effect it is having on start-ups generally”,
and that,
“evaluation should extend to the related tests of ‘gainful self-employment’ which underpin the way in which the Minimum Income Floor operates”.
There is a fundamental flaw in the way that that has been structured. Can the Minister give some assurance that there will be such a robust evaluation of the policy?
Baroness Buscombe
My Lords, in all that we are doing with universal credit we constantly question and consider issues of substantive policy, because we want to make sure that the system works for the long term. The Government want to support people to be self-employed but it is right for them to be financially self-sufficient. Key to this is continuing to support people in, or considering, self-employment to progress to a level of sustained financial self-sufficiency. We recognise that it takes time for new businesses to grow and that even established businesses can experience difficulties. We will therefore provide all gainfully self-employed claimants with an equal chance and support from specially trained work coaches to grow their earnings, and to prepare and adjust for the application of the minimum income floor. We were going to move the minimum income floor to six months after migration, but have decided to introduce a grace period of 12 months.
Lord Shinkwin (Con)
My Lords, my noble friend mentioned the severe disability premium and the serious implications of not getting these regulations through. Will she confirm that these regulations support the most vulnerable claimants moving to universal credit and that, moreover, voting against them would deprive 500,000 claimants of that premium?
Baroness Buscombe
My noble friend is entirely right. I could not put it better myself. We have to make sure that we get these regulations through. If we do not, that support for half a million vulnerable people will be lost. The regulations provide transitional support for recipients of the severe disability premium while removing the complexity of dealing with different rules for seven different disability additions. We want to make sure that we take special care of those people when migrating them on to UC. As the CEO of Citizens Advice, Gillian Guy, said,
“improved protection for people who receive the Severe Disability Premium is a welcome move that will mean better financial security for many disabled people who move onto Universal Credit”.
We must have these regulations.
Baroness Primarolo (Lab)
My Lords, I thank the Minister for the information she has given about the changes made in the Budget last week. However, she will know that the Government had already pre-announced billions of pounds to be cut from the budget that will facilitate universal credit by 2020. Last week’s announcements have given some money back, but not all of it. The Government’s original estimate was that universal credit would lift 350,000 children out of poverty, but the Joseph Rowntree Foundation says that, as a result of these changes, an extra 1.2 million children will grow up in poverty by 2020. What is the Minister’s latest estimate for raising families and children out of poverty as a result of universal credit?
Baroness Buscombe
I am proud to say that this country provides more benefits for families than any other advanced nation. I do not recognise the estimates; it is not right to make estimates without any underlying evidence. We have come a long way since the cuts some years ago to which the noble Baroness referred. There were cuts right across the board, in all departments. For example, the cost of social security went up by 65% under Labour and was becoming totally unsustainable. We could not continue with that rise. We have therefore had to adjust and make some very difficult choices.
We are doing all we can, with the working tax allowance and increased support for childcare costs, to support children and families. An additional 80,000 working parents who are in receipt of transitional protection and who access support for childcare costs provided by UC are expected to benefit from these regulations. The support for childcare costs provided by universal credit, worth up to £1,108 per month for two or more children, is more generous than the system it replaces. However, the most important support that anyone in a family can give their children is being in work; setting a course for that family out of poverty—a hand up, not a handout—and being role models for the children. There are over 800,000 job vacancies at the moment. We want to do everything we can to support people into work, because that is the best way to lift children out of poverty.
Lord McKenzie of Luton (Lab)
My Lords, a moment ago the Minister said that we had come a long way. I am not sure that is how millions of people who have endured this Government’s cuts would view matters, even though a portion is put back in today’s announcements. The Minister said that home visits would be available for help with a claim. On what basis would that be? Would they be available as of right to anybody who seeks one? I recall that with ESA there were meant to be automatic home visits for people with mental health issues. I do not believe that ever happened. What assurances do we have that it will be robust in this case?
Baroness Buscombe
It is important to explain a little more about the test and learn process, which is one of the reasons why we are taking longer than we might to introduce the first tranche of managed migration. We are not doing this by ourselves. It is very much a co-design with a number of charities, the third sector and researchers to help us work out our monitoring. We will closely monitor the quality of communications which we will issue, and whether they are understood by recipients, before we increase the pace of migration. We are also making sure to put out letters that are easier to understand, and constantly working out what we can do. However, if we hear nothing from a claimant, we will offer home visits. That has to be an opportunity for those who are genuinely afraid of change. That is one reason why we on this side feel passionately. The less scaremongering around this system, the better. I put some of the blame on the media, which has not fully understood it.
We are trying to lift people out of the system that trapped them in poverty—on legacy benefits with cliff edges, where they could not work more than 16 or 24 hours a week without losing benefits. The brilliant thing about this simplification—merging six benefits into one—is that you do not lose your benefits. Your benefits may now increase by £1,000 before they begin to taper, and the taper rate has just been reduced from 40% to 30% of your standard allowance. I also remind the party opposite that when it left government and this party came into power—the noble Baroness may shake her head—this Government had to fund debt amounting to 10% of our GDP. That was the issue facing us.
Lord McKenzie of Luton
Would the Minister care to reconsider what she has just said about the taper rates being reduced from 40% to 30%?
Baroness Buscombe
My Lords, I am sorry, it should be the debt repayment rate. I am grateful to the noble Lord. I am so eager to get this right, and noble Lords may understand that there are quite a lot of numbers and it is quite technical. I am quite emotional about the fact that we are the party of social mobility and we have introduced a system that we genuinely believe will be better for everyone. It is, however, a very hard system to get right for everyone, because everyone is different—we are dealing with different situations and circumstances and we do not want people to fall through the cracks.
Baroness Andrews (Lab)
I appreciate what the noble Baroness has just said, because it is an extraordinarily complex system, and this is the biggest—and riskiest—change in social security for decades. She has said that people’s lives are different. When she refers to working conditions and benefits, surely she should remember what we have been saying about the need to take great care—universal credit is great in principle but very difficult to get right. A redesign should not be beyond the Government’s confidence.
I will repeat one question that was raised by both my noble friend on our Front Bench and by the noble Lord, Lord Kirkwood. If the Government want, as they must, to simplify whatever they can, surely they should have a better answer than the one they have given about why they do not segment certain categories of people that cannot be treated universally. It would be relatively simple to do. Apparently the department has said that it cannot be done. That is not a good enough reason when the noble Baroness is struggling to explain what will happen. There is a risk of mistakes that will bear down on the very poorest with disastrous results. This is not scaremongering, and I resent it being described so: these are very serious challenges for the very poorest in our society.
Baroness Buscombe
I agree with some of what the noble Baroness said but not that I am struggling—I am just saying as much as possible in the time allowed. There is a lot to say—a lot that is positive. I repeat, however, that she is correct in saying that it is hard and that we have to get it right. That is why we are going to spend so much time on the design, which is not there yet—we have not yet designed the managed migration process. That is the point: we will have rolled out universal credit itself in all the jobcentres—634 of them, I think—by the end of this year, but we will take the actual managed migration process much more slowly, because it will lift people already on benefits from legacy benefits on to universal credit.
I wish that we could automatically transfer certain categories of people seamlessly, but we did that in 2011 when we were moving people from incapacity benefit to ESA, and the problem was that we missed some people’s change of circumstances and underpaid them. We do not want to take that risk again—we would be facing another judicial review. We know, however, that about 700,000 people are not receiving the legacy benefits—worth about £2.4 billion—that they are entitled to, and we want them to. That is one of the main reasons why we want face-to-face contact—work coaches and claimants working together to make sure that they get the right support.