Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015

Baroness Sherlock Excerpts

Thursday 22nd January 2015 Grand Committee

Finally, I have a statistical question. I may have heard my noble friend incorrectly, but I thought he said that there could be up to 15,000 people involved in this piloting, testing and trialling work. At the moment there are 27,000 people on universal credit. A pilot of 15,000 out of 27,000 seems an extensive test. It would be more than half the people on universal credit, which is why I return to my first remark, which encouraged my noble friend to tell us where we might be on numbers on universal credit by the end of March.

[Baroness Sherlock (Lab)]

My Lords, in thanking the Minister for that explanation, I am expressing more than just the usual courtesy. As has been alluded to, the Secondary Legislation Scrutiny Committee commented on the very wide nature of the powers that the Government are seeking through these regulations and the remarkable paucity of information in any of the material available to us about the way in which they intend to use them. Therefore, although I am very grateful, and without sounding too churlish, I would rather have had some of that information so that I could have considered it more carefully before getting to the stage where we are asked to consider the regulations. I will do my best, but I may end up intervening in the Minister’s reply. I hope that he will bear with me if I have misunderstood some of the information that he gave us today. However, I thank him for it.

The Minister mentioned that these powers are very wide, and that is certainly true. This is quite an interesting point for us to be at. We discussed the question of in-work conditionality extensively when the Bill was going through this place, particularly in Committee. One reason that it is so worthy of attention is that it is very new. The Minister mentioned that it is new internationally, but certainly people currently in work are going to get a bit of a shock. At the moment, if you have been on benefits and you get a job, you do not expect the department to ring you up at work saying, “Come and talk to me because you’re not working enough”. I think that people who feel that they have escaped the tender ministrations of the jobcentre are going to be a little taken aback when they find that it starts following them to work.

I wonder what thought the Government have given to this cultural shift and how they are going to engage with people who, when they think they have done the brilliant thing of getting a job, will find that it might be a job but it is not good enough, not big enough or not well paid enough. Under the current system, if someone is working at least 16 hours a week, they can claim tax credits. However, under universal credit there will be no minimum hours requirement, which is the Government’s reason for introducing conditionality for people in work.

I should like some clarification on how this is going to work. Some points have been touched on by the noble Lords, Lord German and Lord Farmer; others have not. First, in the various pilots, will there be the same level of income which triggers entry to or exit from the scheme? I am also interested in hearing the answer to the question from the noble Lord, Lord German, on what that level of income is. Will the income threshold be the same for a household or a benefit unit—the rather ugly phrase favoured by the DWP? In other words, is it a threshold for each individual in a household of, say, two or more adults, or is it for the whole household? For example, if one person in a couple were earning more than the threshold for two individuals, would the second person then not be under any pressure to increase their hours, change their working pattern or increase their income?

Next, the Explanatory Memorandum states that the DWP will impose,

“different sets of requirements on different groups of claimants selected for the pilot”.

The Minister began to outline how that might happen, but the committee’s report flagged up the ethics of an approach which deliberately seeks to test different approaches to claimants simply to work out the behavioural impacts. The noble Lord, Lord Farmer, commended the benefits of randomised control trials to test the evidence if done in a low-risk, controlled environment. However, the problem here is that the risks are not merely to the resources invested by the state but the impact on the individuals. Can the Minister tell us what discussions the department had about the ethics of that? I will come on to the question of sanctions in a moment. In a randomised control trial of, say, pharmaceutical drugs, there can come a point where a trial is stopped because it becomes clear that the evidence is very strong one way or the other and, as the drug is so effective or so ineffective, allowing a control group to carry on without it or continuing to give it to the group being tested would simply be unethical. Has any consideration been given to how the ethics would be weighted as the requirements are imposed and the evidence starts to come in?

Next, I turn to the numbers, which the noble Lord, Lord German, began to prod. I am very interested in them. I think that we all want to know what the denominator is. Are the numbers going to change? If we start off with, say, 15,000 out of 55,000, is that going to change proportionately? Will we see a different proportion of the universal credit claimant base involved all the way through? What proportion of that 55,000 will be eligible for the scheme? It presumably includes some people who would not, for a variety of reasons, be eligible, so that is not necessarily the denominator. What is the denominator? This was something that the Secondary Legislation Scrutiny Committee specifically asked the Minister to tell us, and I shall be very interested to hear what he can tell us about this.

I am also interested in having more information about the control groups. The Minister mentioned one control group, which I think he said would get just the occasional phone call. How big will that control group be, and can he tell us more about it? Will it be spread right across the country? Will it cover the full range of categories of claimants who will be covered by the other pilots? Will that change as different categories of claimant come on-stream with universal credit? That question applies also to the pilots. Will the pilots cover all the different categories of claimant as different kinds of people are brought on?

Secondly, on the flexibility of trends, I understand why the Government want a flexible power to tweak things as they go. However, coming back to the points made by the noble Lord, Lord Farmer, I want to understand how that impacts on the Government’s ability properly to evaluate the evidence. If you try to compare the effectiveness of a strategy with the control group but you are constantly tweaking things, how good will the data gathering be? How well will the department be able to understand the causality to enable it properly to understand what happens? The state generally does not always have a great track record on this. If we are to spend all this time and money on a trial, as well as put people through it, we want to be really sure that the findings are robust. I am very glad that the Minister committed to publishing the findings, but we want to have confidence and know the study is replicable. If it is tweaked too often or becomes too different, it will be quite hard to evaluate that. Could the Minister explain that?

Next, could the Minister say a little more about what kind of support will be offered to people in work? He indicated what kind of pressure or interventions there are in terms of encouraging them to come in, but what help will they then be given? I seem to recall that this was advocated at one point by saying, “People get lots of help to develop their careers if they are high-flying executives, but get nothing if they are lower than that”. What actual help will be offered to them? Will it be mentoring or work coaching?

Then there is the voluntary or otherwise nature of this, which was flagged up before. Again, will any of the pilots make this a voluntary option or will it always be compulsory? This point was raised in the other place by the Conservative MP Nigel Mills, who in fact suggested that the Government trial both. He also asked how soon after taking a job in-work conditionality would kick in. For example, if I got myself a job for 16 hours a week, it goes really well and I have been out of work for a long time, presumably the department would not ring me up on week two and say, “No, tough: you now need a better job on 30 hours a week or one that is better paid”. How long will a claimant get in a job before in-work conditionality kicks in?

Next, and this is a really important point, can the Minister tell us more about how caring responsibilities will be taken into account? This is something that exercised the Grand Committee considerably when the Bill went through the House. I have met many people in this circumstance. The noble Lord is aware that in the past I ran a charity that worked with single parents. We ran programmes helping people into work. We often found that lone parents took a job, say on 16 hours a week. One of the reasons employers liked these people was that they stayed in the job a long time so the employers had much lower turnover than with some other employees. One of the reasons that the lone parents stayed a long time was that they had found an employer who enabled them to combine their job with their families. For example, the employer would be flexible if occasionally a child was sick or if the employee had to leave early because a problem arose at school. The employee would be very loyal to that employer and stay for a long time because it worked for both of them. However, it meant that they might work fewer hours than they were capable of. I am just concerned—and raised this in Grand Committee at the time—about what happens to those people and what pressure they will be put under. Presumably, we would not want to see a lone parent who had been in a very successful job for maybe 10 years but at 16 hours a week being pushed into giving it up to take a better paid but less flexible job that she might have to give up anyway or that could be less secure. How will the Government deal with something like that?

Also, how will the Government consider the impact on childcare? I raised the issue in Grand Committee of a lone parent of a 13 year-old who began to have problems at school. That parent had taken a job of 25 hours a week because that enabled her to get home in time to make sure that the teenager came home from school and was not out on the streets having “difficulties”. If she were required—the implication is that she now would be—she would have to take a job of, say, 35 hours a week at minimum wage. She could also be forced to do 90 minutes’ travel either way because that is what the guidance says. Those are then very significant hours, and getting childcare for a 13 year-old is not easy. It is not often available, and it is very hard to get them to accept a child like that. So how much flexibility will be there?

I do not apologise for the large number of questions as these are very significant matters. Next is the issue of sanctions. Is it intended to use the full range of sanctions available? In other words, could somebody lose all their universal credit for three years for failing to take action that they were advised was necessary to increase their hours or earnings, such as, that lone parent? What if someone is concerned about jeopardising their existing job for other reasons? It has been confirmed that universal credit claimants will have to take a zero-hours contract, although not an exclusive one. If they were, for example, required to take additional hours at short notice but were also expected to take a job interview elsewhere or meet their adviser to think about getting a different job, they could be at risk of jeopardising things.

--- Later in debate ---

What are we looking for? We are looking to help people to earn more, which is not just about looking for more hours; it could involve more skills. We will find that out. That is a good outcome. I think that I have dealt with all the issues.

[Baroness Sherlock]

The Minister has done very well. I do not like all the answers, but he has done very well at trying to address many of the points. I will just pick up a couple of them.

First, can he tell us who will deliver the support? Will it be Jobcentre Plus staff or others, and what are the resource implications for the public sector? On the business case, if the £15 million and the light-touch control group are in the original business case, what about the rest of it? I may have misunderstood his comments on that, but where is that to be found?

As for tracking outcomes, obviously RTI works for those who are paying tax and national insurance, but for this to work properly the Government would also need to track people who were not to be found on the system and to find out why not. I am sure the Minister would rebut this, but there is a growing concern—he will have seen both recent media reports and the work of the Work and Pensions Committee—that the ways in which sanctions are being imposed at the moment are completely arbitrary. The only success measure for Jobcentre Plus staff is how many people are driven off the benefit rolls rather than into work. No one bothers to find out the numbers, but the suggestion is that only about one-fifth of people leaving benefits go into work—nobody knows what happens to the rest.

This was a real issue, as I am sure the Minister is aware, in one well known phase of welfare reform in the United States. Researchers tracked people longitudinally and found that a lot of them had simply ended up dropping out of the system completely. At this stage I am not making a value judgment about that, but for this to be properly effective the Government would need to follow those people through and find out what had happened to them to understand what the consequences of that were.

The Minister mentioned skills and the kind of support that is available. If one of the barriers to someone’s progression that is identified is a lack of skills, will the pilots be able to provide skills, or resources to enable people to get skills, which might enable them to earn more and break free of the threshold that would be constrained by this? I also asked whether the same income threshold would be applied for entry to or exit from all the pilots. Is that one of the things that is going to be flexed in any way? Is it the same for all of them?

On the question of ethics, the Minister said at the start that these regulations comprise strictly defined limits. In a manner of speaking they do, but only in the sense that I am strictly defined by the law of gravity, which still gives me quite a lot of latitude in how I go about behaving. The Minister also said that he will give us no information on numbers. Presumably, that could theoretically mean that the entire universal credit population could be put into this without any need for further recourse to Parliament. Is that right? In other words, when does this stop being a pilot? I am trying to establish whether the regulations were really designed to be able to pilot something. The scale of this is such that I am beginning to wonder whether Parliament would really see this as being a pilot. Although I am very glad that the Minister is going back to the SSAC, there is no obvious way to scrutinise this here. Will he give some more thought to that?

Finally, I want to clarify something relating to the sanctions. If the Minister is saying that the requirements will be no worse for people in work than for those out of work, my response would be that I would hope not, otherwise the incentive for getting a job would seem to be rather small. However, that presumably means that somebody could lose all their universal credit for three years for a failure to comply with a brand new requirement exercised by his staff—something that has never been done before. Is the Minister confident about that? I realise he has said that nobody will be sanctioned without good cause, but we both know that there are plenty of examples of people who have been simply because there is a significant amount of error in the way that the guidance has been applied. Cases are constantly being brought forward, and he will be aware of that. How will he check up on that? How will he quality-test the nature of that?

I am aware that I have asked a lot of quite specific questions. I would be grateful if the Minister, with his normal customary kindness, would allow his officials to go through the record and write to me on anything that has not been picked up.

[Lord Freud]

I will certainly go through the record but I am doing my best to answer everything. There is a technical question about income in and out. At the top end, a single person stops being in this trial when he or she hits 35 times the minimum wage—I think, from memory, that it is £116-something. I may be corrected, but that is the top end. The bottom end for a single person is, effectively, £76, and for a couple it is £116, we think.

Essentially, we are trialling this group because people would have come off the out-of-work benefits system at 16 hours times the minimum wage up to where they would get out of conditionality entirely because they would have satisfied 35 hours times the minimum wage. We do that for singles and couples. My figures are being hastily checked but that is the principle behind the answer.

[Baroness Sherlock]

Is that for all pilots? It is not a variable?

[Lord Freud]

Yes. Let me make absolutely sure that I have got the figures right. It is £76 for the individual. However, it is not £116 but £126 for the couple. The figure for an individual at the top end which gets you out of conditionality is £230. So it is within that range of earnings. Clearly quite a lot of people may be doing fewer hours if they are earning rather more.

[Baroness Sherlock]

I am grateful to the Minister and I thank him for establishing those ranges. However, what I am trying to get at is whether exactly the same ranges will be applied in all the different pilots, or are the Government testing whether the ceilings should be set at different levels?

[Lord Freud]

We are going to stay in that range because that is the group for which in-work conditionality would apply. There is no point in testing other ranges. However, we will have information, which I think is the underlying point of the noble Baroness’s question, on how different segments of earnings within that range respond to the different types of regime.

[Baroness Sherlock]

The Minister is being incredibly helpful. I apologise for my having to work this out on the hoof, but I think the Minister is saying that only people whose earnings are within that range will be subject to a pilot. I am trying to establish whether people who are at different points in that range may be subject to different trials. I will say that again. Will people on the same income within that range be subject to different pressures or levels of support requirements?

[Lord Freud]

The answer to that is no. We will put people in within that range. We will then have a process of personalising and tailoring the claimant commitment, which may contain an element of what their earnings are or could be. So I can answer no and yes. It will not be done at a mechanical level but may be done at an individual level.

[Baroness Sherlock]

I am very grateful to the Minister—I had not understood that at all. In that case, we are saying that each of these 15,000 people might have a different target of earnings that would allow them to exit from the conditionality and the programme. That raises some very significant ethical questions and I would strongly ask the Minister to consider giving more thought to this. I am very slowly doing a PhD. Before I am allowed to do anything involving other people—human subjects—I have to go to an ethics committee which puts me through my paces quite carefully. The consequences here are not just differential levels of support but that, potentially, two people in almost identical circumstances might do the same things, but one would lose three years’ worth of universal credit while the other loses nothing. That is a radical step for the Government to take. Has the Minister really thought through the ethics of that?

[Lord Freud]

This is how one delivers personalised support. The claimant commitment is in the system. Elements of the claimant commitment have a mandatory aspect but with others it is just an agreement. In reality, in the trials we will set the claimant commitment rather carefully. It is an agreed document between the work coach and claimant. Elements of that claimant commitment may be mandatory but quite a lot of it will not be. The likelihood is that as we run the trials we will look extraordinarily closely at making sure that we do not have any unsatisfactory sanctioning behaviour. We will test for that. This is a trial.

Although 15,000 people sounds a lot, when universal credit is fully rolled out, we will be dealing with 20 million people—8 million-odd households, comprising 12 million-odd adults and then a number of children. We are talking about a very small number so that we can micromanage it in terms of that kind of concern. The noble Baroness, rightly, is focused on us getting that right, and we are utterly conscious of that particular issue. The numbers will allow us to make sure that there are not those kind of arbitrary differences, as she described them, particularly when the sanctioning regime can move quite rapidly.

Skills is clearly one area where we could do a lot more development as we find the programme beginning to work. In this first trial, we plan to signpost the National Careers Service and colleges. There will be money available to support that through the adviser discretionary fund.

On RTI, the figures are that around 94% of people in formal employment are captured in the PAYE process. Some self-reporting may be required but we will get the bulk of them. Clearly, we will look at other things than just the RTI, but the RTI should give us a good feel for this. We will look at whether there are some anomalies going on where people fall off the system. That is one of the most important things that we will find out from the trial.

The light-touch regime in the business case is funded. Clearly, we will only introduce a less light-touch regime if it offers value for money. That will be part of a negotiation, if we discover it is worth doing. We will not spend hundreds of millions of pounds on a regime that somebody made up in a darkened room when it has no effect. That is why we are doing these trials. Who will deliver these trials? To start with, it will be Jobcentre Plus, as I have described. That is the first iteration; we could go on to other iterations. I described, I hope, the light-touch regime, which involves two work coach conversations. One happens when someone enters work and the other occurs eight weeks later. That is what the control is based on.

I think that I have dealt with the question of sanctions. The noble Baroness will be quick to correct me if I am wrong, but I think that I have covered everything. However, on her point about the numbers, by March, we will have moved to one in three jobcentres. I am sure that she will be the first to acknowledge that, and she will have seen the escalation: 54,000 have already applied for universal credit and the figure is moving up rapidly. That is when we will start pulling out the people on universal credit who are in work to test them.

This is about the commitment by this Government to deliver a universal credit that genuinely supports working-age people when they are out of work and then in work. It gets rid of the distinction which, in my view, has been invidious in our support system. If we are going to do that, we have to understand how best we can support the in-work claimants and get them to get their earnings up. The regulations before us today combine oversight and flexibility in the optimum way.

During the passage of the Bill I was very clear that, in driving through this approach, we would do it through a regulatory structure, so that we could have these debates, keep an eye on it and get that balance. It is a very delicate balance but we will build an evidence base on how we can improve people’s careers and improve earnings among the low-earning. If we get this right and learn how to do it properly, this piece of research will be a key element in improving the economic performance and productivity of the country. That and the fact that people’s lives will be better when they earn more are the two fundamental reasons that I commend these regulations to the Committee.