Universal Credit and Welfare Reform

Anne Begg Excerpts

Tuesday 11th September 2012 Commons Chamber

[Mr Duncan Smith]

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

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

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

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

[Dame Anne Begg (Aberdeen South) (Lab)]

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

[Mr Duncan Smith]

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

--- Later in debate ---

[Dame Anne Begg (Aberdeen South) (Lab)]

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

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

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

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

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

[Alison Seabeck]

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

[Dame Anne Begg]

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

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

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

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

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

[Jane Ellison (Battersea) (Con)]

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

[Dame Anne Begg]

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

[Mr Duncan Smith]

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

[Dame Anne Begg]

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

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

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

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