The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office and Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I congratulate the committee and my noble friend on the report that we have been considering today. I will start by saying that I completely appreciate the depth of feeling and passion on the issues that have been raised.
I start by disagreeing slightly with something. When it is said that universal credit is not working, I would have to disagree. If we had had the legacy system in place and the issues around Covid-19, I doubt that anybody would have got any money on a regular basis. There are certainly a lot of elements of UC that work, but today all noble Lords have raised concerns that we must take account of, and we must change where it is possible to change.
The reform of universal credit is an ongoing process. It is under the leadership of Neil Couling and his team. I congratulate them on their excellent work.
My noble friend Lord Forsyth mentioned pre-paid meters. At this stage, let me say that I completely agree about the issues and additional expense that they cause. This situation rests with BEIS but I undertake to follow up on it personally, as I agreed to do in the Chamber earlier this week.
I completely agree with noble Lords that this is a difficult time. I would like to set the record straight, if I may. On universal credit and the monthly assessment period, if we had had the tax credit system, there would have been an annual assessment. That is why we have the debt we do. A monthly assessment is far better for the individuals we are trying to serve.
I thank noble Lords for their contributions to this debate. It is worth noting, as some have said, that this report was commissioned prior to Covid-19. In what has been a very difficult period, the universal credit system has proven its worth through the invaluable support it has given to the 6 million people who faced financial insecurity during this time, with the pandemic seeing the amount of universal credit claims double and many people—a high proportion of them—being paid on time.
On the cost of living, which all noble Lords raised, the Government have introduced new measures to help with energy costs on top of the existing £12 billion of support that they are providing to help families during this financial year and the next. We are increasing the national living wage to £9.50 but I take the point made by the noble Lord, Lord Desai, about whether it is a living or a thriving wage; however, we have increased this amount as the years have gone on.
I will come on to more interesting points about housing costs, but we have helped with the cost of housing. Discretionary housing payments can be paid and are very flexible. In 2021-22, the Government made £140 million of discretionary housing payments available to local authorities. Vulnerable renters struggling due to the impact of the pandemic will be helped by a £65 million support package announced by the Department for Levelling Up, Housing and Communities. The funding will go to councils in England to support low-income earners in rent arrears, helping to prevent homelessness.
The noble Baroness, Lady Janke, and the noble Lord, Lord Kerr, raised the issue of energy bills. The Government have announced that they will provide significant financial support of up to £350 to the majority of households, protecting them from half of the forecast £700 rise in energy bills. This support is worth £9.1 billion in 2022-23.
There is also a £150 non-repayable cash rebate on council tax for 80% of households, and the Government will provide £144 million in discretionary funding for local authorities to support households that would not be eligible for that. There is the warm home discount scheme, cold weather payments and help with basic food costs through Healthy Start food vouchers. We are investing more than £200 million a year in our holiday activities programme while ensuring that children get food in the school holidays.
Noble Lords have said that our record on the cost of living is poor. I do not accept that. We have a proud record of being on the side of working people. Since 2010, under successive Governments, we have doubled personal tax thresholds, which we increased again today. We have doubled free childcare, which I will come on to. We have increased the work allowance and cut the taper rate; my noble friend was right to say that this measure was in his report prior to us doing it. Of course, as I said, we have also extended free school meals.
The robustness of the UC system was evident in dealing with an unprecedented event, which we could not have foreseen. As I have said, this would not have been possible under the legacy system. The digital nature of universal credit allowed for its adaptability during this period, where we managed to get a record number of claims processed within the first few months. This ensured financial security at a very uncertain time, with around 95% of claims being paid at the end of their first assessment period, despite pressures on the UC system. Regrettably, I must say that during this period organised criminals and opportunists sought to exploit the extraordinary circumstances of a global pandemic for gain.
Last autumn, we announced a 75% uplift in our investment in counter-fraud, compliance and debt operations, taking our funding to £1.4 billion over the next three years. With this funding, we are: setting up a new, targeted review of universal credit claims; investing in enhanced data and analytics to prevent fraud and error occurring; increasing our capacity to address serious and organised crime; and scaling up our existing operations, through funding for around 2,000 additional trained specialists to identify and stop scammers. This investment will generate billions of pounds of savings over the scorecard period.
The noble Lord, Lord Shipley, and the noble Viscount, Lord Chandos, raised Help to Claim. We recognise the challenges that a digital platform may pose for those who are unable to use this technology. That is why we have support through Help to Claim, and the alternative of being able to make a claim by telephone. A £21.3 million investment has been made available for the Help to Claim provision, providing support for a further 12 months, following a recent competition. From 1 April 2022, people will be able to access Help to Claim support online and over the phone through Citizens Advice and Citizens Advice Scotland. The service will be available at any time until the first full, correct payment of universal credit is made. People who are unable to access support, or to make their claim to universal credit by telephone or online, will be able to go to their jobcentre, where jobcentre staff will identify the right support to meet their needs.
The use of assessment periods ensures that we calculate a household’s benefit entitlement correctly, reducing overpayments and debt for families who already face financial uncertainty. The use of real-time information further enables this with accurate and current earnings information, ensuring the robustness of the assessment of entitlement.
All noble Lords have raised the issue of advances. I must confirm that, for those in financial need, the introduction of new claims advances allows for an eligible claimant to receive their full benefit entitlement up front, resulting in 25 payments of UC over 24 months. For those looking for work, universal credit works alongside existing provision to get people back into work, and to help fill the 1.2 million vacancies available. To highlight this, the Government’s Plan for Jobs initiative has made great strides in its bid to help 2 million people back into work. Further evidence can be seen through Kickstart, which is integrated with the universal credit system, resulting in over 130,000 young people getting valuable work experience to assist them to move forward in their careers. This is complemented by the reduction of the earnings taper and increased work allowance to ensure that work does pay, and results in 1.9 million households keeping, on average, around an extra £1,000 a year.
The department firmly believes that the best way to support claimants is through empowered work coaches, who engage proactively with claimants to help them identify the options they need to help build their skills, increase their confidence and return to employment. The claimant commitment is a tool for setting out, and getting the claimant to take ownership of, what they need to do in return for receiving their UC. In this sense, conditionality is indeed adapted dynamically with the claimant to ensure that the requirements for receiving support are appropriate and proportionate to the claimant’s current situation.
The claimant commitment is a key enabler to support claimants into work or to increase their earnings. For staff, it should be an enabler which supports robust setting and monitoring of work-related activities, and fair decision-making in relation to sanctions. The claimant commitment is a living document and is continually reviewed with the claimant, as appropriate, to ensure that it reflects their current situation. As such, the department considers that this meets the needs of the claimant, as well as our work coaches, in supporting claimants back into work.
When moving into work, there is additional support through the universal credit childcare offer. I completely understand the challenges that people face with childcare and that it sometimes stops them moving back to work. Eligible UC claimants can claim back up to 85% of their registered childcare costs each month, regardless of the number of hours they work, compared to 70% in tax credits. These can be claimed up to a month before starting a job and eligible claimants can receive help for upfront childcare costs by applying for help from the flexible support fund. Our work coaches absolutely love the flexible support fund and will use it legitimately for anything that helps to remove barriers for people going back to work. That help is non-repayable and paid directly to the childcare provider, where it is used for childcare fees. Additionally, a universal credit budgeting advance is available to eligible UC claimants to assist with upfront costs.
The Government are committed to improving the lives of disabled people and delivering the most ambitious disability reform agenda in a generation. In 2017, we set a goal to see 1 million more disabled people in work by 2027. In the first four years of the goal, between quarter 1 2017 and quarter 1 2021, the number of disabled people in employment increased by 850,000.
For those unable to work because of ill health or disability, universal credit provides generous support. A claimant who is determined to have limited capability for work and work-related activity is awarded an additional amount of benefit; it is currently £343.63 per calendar month, which is more than double the equivalent rate paid in employment and support allowance. Additionally, claimants who are assessed to have limited capability for work, or for work and work-related activity, are eligible for a work allowance and, in couple claims where one is working, access to help with childcare.
I try to be as respectful to noble Lords as I possibly can in all these debates. The two areas that the noble Baroness, Lady Lister, raises frequently—I respect her for it—are the benefit cap and the two-child policy. There is always a balance that must be struck between supporting those in need and having a system that provides a strong work incentive and fairness for hard-working tax households. This is not a new concept.
I remind all noble Lords that the proportion of households capped remains low, at 1.9% of the overall working-age benefit caseload. Exemptions from the cap also exist, such as those for households with earnings of at least £617 in an assessment period, and for those who are vulnerable and receiving disability benefits or are entitled to carer benefits. In addition, it is worth highlighting that the national cap of £20,000 is equivalent to gross family earnings of around £24,000, while the London cap of £23,000 is equivalent to gross family earnings of around £28,000.
The two-child limit is based on statistics from the Office for National Statistics showing that, in 2020, 85% of all families with dependent children had a maximum of two in their family; for lone parents, it was 83%. On the latest figures, 62% of households with a third or subsequent child that are in receipt of UC or CTC are not affected by the two-child policy. It is important to support families, but it is also important to be fair to the many working families who do not see their budgets rise when they have more children.
I will come on to some of the more specific points raised. I will see what I can do within the limits on my time.
A question was asked by my noble friend Lord Forsyth, the noble Lord, Lord Shipley, and others about why it is paid monthly. Universal credit is designed to top up earnings from employment, adapting to changes in the amount of earnings received each month. I must tell noble Lords that the department has no plans to change either universal credit assessment periods or payment structures. The current approach reflects the world of work, where the majority of employees receive wages monthly. Paying in this manner will encourage claimants to take personal responsibility for their finances and budget on a monthly basis, which could save households money. Ensuring similarities between paid employment and receiving benefits also eliminates an important barrier, which could prevent claimants adjusting to paid employment.
I cannot say this with utter confidence but I am quite sure that, where claimants are in difficulty and hardship, work coaches can help them. Rather than give information that is not 100% correct, I will write to noble Lords to confirm the additional support for when people are in difficulty.
The right reverend Prelate the Bishop of St Albans referred to the monthly assessment periods. Entitlement to UC is calculated in monthly assessment periods and the amount paid reflects as closely as possible the actual circumstances of a household in each assessment period, including any earnings reported by the employer in that period. Monthly reporting allows UC to be adjusted monthly, which I can only say is better than the tax credit yearly reconciliation. It ensures that, if a claimant’s income falls, resulting in a rise in their universal credit, they will not have to wait several months to receive it.
My noble friend Lord Forsyth raised the whole-month approach. As I have said before, universal credit is assessed and paid on a monthly basis. It is paid in arrears for each month and the amount will not vary to reflect the number of days in the month. To simplify the policy, we took a whole-month approach to changes of circumstance. This is a fundamental design principle of universal credit and is more straightforward for claimants to understand as they can anticipate how much universal credit they will receive, so can budget accordingly.
I come to the work of the work coaches. From all my dealings with them, all the visits I have done and all the times I have spoken to them, I know they are doing a first-class job. Nothing makes their heart sing more than when people get the right support and get into work, and where their payments are made correctly. We have 104 intensive work search claimants per work coach. To meet the demand for jobcentre services, DWP successfully recruited 13,500 new work coaches by March 2021. If any noble Lord wishes to meet a work coach, I would be only too happy to make those arrangements so that they can talk to them and see at first hand what they do. Whether the issue is money, childcare, personal circumstances, domestic abuse or anything else, they stand ready to help our clients.
My noble friend Lord Forsyth and the noble Baroness, Lady Janke, mentioned written warnings. In 2018, we committed to look at processes to give claimants a written warning instead of a sanction, sometimes referred to as a “yellow card”. We have restarted the work to test issuing a written warning instead of a sanction for a first sanctionable failure to attend a work search review. A second proof of concept is testing the operational viability of a warning system, and a further proof of concept is planned for later in the year. Once the proofs of concept are complete, we will assess the results and determine whether a larger-scale pilot is required. On sanctions, let me just say that no work coach or person in the system goes to work with a target to sanction so many people. They go to work thinking, “How many people can I progress today and get into work?”
Many noble Lords, including my noble friend Lord Forsyth, the right reverend Prelate the Bishop of St Albans, the noble Lord, Lord Shipley, and the noble Baroness, Lady Wilcox, talked about advances. For UC, new claims advances are available urgently if a claimant needs support during their first assessment period and budgeting support is available for anybody who needs extra help. Advances of 100% of potential UC entitlement are available urgently. With an advance, claimants receive an additional UC payment, resulting in 25 payments over a 24-month period. We have reduced the normal maximum rate of deductions from 30% to 25% and have made numerous improvements to UC, including ensuring that people get the money they need as soon as possible through advances.
There was reference to the advances creating debt. I think the noble Viscount, Lord Brookeborough, mentioned people who have never been in debt in their life. I understand the delicacy around this, but we are trying to get money to people who need it and for them to repay it, which is not unreasonable, over a period that they can cope with.
My noble friend Lord Forsyth made points about the current system supporting the long-term unemployed to move from one low-paid job to another. Our job is to get people into work, a better job and a career. We are managing to achieve this through our Plan for Jobs programme, with more news to come on the in-work progression system when that works.
I have already talked about the five-week wait. Nobody has to wait five weeks; I can only endorse that again.
We have talked about the benefit cap and the two-child policy. Through everything they have raised, noble Lords have talked about fairness in the system, which I understand. For policy areas that are often open to criticism that are highlighted in this report, such as the benefit cap and the two-child policy, there is always a balance that must be struck between supporting those in need and providing a system that provides a strong work incentive and fairness for hard-working taxpaying households. This is not a new concept and one that we will not change.
A benefits structure adjusting automatically to family size is unsustainable, and the Government have had to take the difficult decision to stabilise our economy and build a welfare system that works for those who use it, as well as those who pay for it. The Government’s view is that providing support for a maximum of two children in UC and CTC ensures fairness between claimants and taxpayers who support themselves through work. I doubt that I could have done anything to placate noble Lords on that issue, but it is the Government’s position.
The noble Baronesses, Lady Janke and Lady Lister, talked about the adequacy of the benefits system. All benefit uprating since 1987 has been based on the increase in the relevant inflation index in the 12 months to the previous September, as happens now. We all know that 3.1% was used this year.
The noble Baroness, Lady Lister, raised the move to universal credit. The pilot scheme that had been active in Harrogate was suspended as the department focused on delivering the Government’s ongoing response to Covid. Ahead of restarting activity around the move to UC this year, we want to ensure that claimants are aware of their entitlements and to support those who wish voluntarily to move to UC to do so. The department will make an announcement in due course on the plans for the move to universal credit. I have no doubt that there will be all-Peers briefings and meetings for us to discuss that.
Baroness Lister of Burtersett (Lab)
Could I ask the Minister about take-up estimates?
Baroness Lister of Burtersett (Lab)
I asked a number of questions about migration to UC. Perhaps the Minister could write about that as well.
Baroness Stedman-Scott (Con)
I will cover that in winding up; I am conscious of the time.
The noble Lord, Lord Shipley, raised food banks. Food banks are independent charitable organisations and the DWP does not have any role in their operation. There is no consistent and accurate measure of food bank usage at constituency or national level.
On third-party deductions, benefit debts and social fund loans can see deductions reduced or deferred as the creditor, DWP, will always try to ensure that government debt is recovered effectively without causing undue hardship.
The noble Lord, Lord Shipley, talked about an impact assessment. The Government recognise that the public sector equality duty set out in Section 149 of the Equality Act 2010 is ongoing. As such, a full equality impact assessment was completed prior to the introduction of the uplift to UC, and it was reviewed and updated prior to the implementation of the temporary six-month extension announced by the Chancellor at the Budget on 3 March 2021.
I have already covered cost of living issues, fully cognisant of the difficulties that people are facing. I have heaps of information here. I try to answer all your Lordships’ questions and to treat the Grand Committee with respect. I do not want anyone to think that I am not prepared to answer questions; I will go through Hansard and through all these questions. I will write, and all noble Lords will get a copy of that. I thank your Lordships for the time you have spent listening to me.
Lord Shipley (LD)
Before the Minister sits down, I would be happy if she would write very specifically on the closure of DWP offices, some of which are clearly closing and not being replaced by alternatives.
Baroness Stedman-Scott (Con)
I have an extra few seconds: we are rationalising back offices, and no job centres or face-to-face situations are involved. There is no desire whatsoever for anyone to lose their job.
Lord Forsyth of Drumlean (Con)
My Lords, this is an unusual experience for me, because I have not found anyone to disagree with. On the fact that this committee is so much in agreement, on 9 March 2021, we did something rather unusual: we had a joint meeting of the Economic Affairs Committee and the House of Commons Select Committee concerned with these matters. We were unanimous in our view, and we took evidence from Mr Couling and the then Minister, Will Quince MP. There was universal agreement, except with Mr Couling, who thought that we were interfering with his perfect system. I think he said that making any changes would make it even more complicated and that he had devised a system which he thought would be around for generations to come. It is a classic example of coming up with a perfect system that everyone has to fit into and then ignoring the problems that occur.
I pay tribute to my noble friend the Minister. She does a fantastic job, and we all know that she is very well aware, from her own background, experience and the care with which she does her ministerial job, of the kinds of problems that arise. We know that the real problem here is the Treasury.
Lord Forsyth of Drumlean (Con)
That reminds me of something from my noble friend Lord Dobbs: “You may say that, but I couldn’t possibly comment”.
I very much appreciate the way in which the Minister responded to the debate, but I know that the noble Baroness, Lady Taylor, has been very patiently waiting to get on with the debate on the excellent Constitution Committee report, so I just thank everyone who has participated. Let us hope that the urgency and severity of the situation means that Mr Couling, the Secretary of State and the Treasury will mend their ways. I beg to move.