Universal Credit

Chris Leslie Excerpts

Wednesday 9th May 2012 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

May I say what a lucky honour it is to have the first Adjournment debate of the new Session?

In October 2013, we will see one of the biggest changes to the welfare benefits system since the second world war with the introduction of the new universal credit. The Welfare Reform Act 2012 has gone through, and there was a lot of focus on the fairness and unfairness of various benefit changes, but there was not much focus on the administrative changes involved in the move to universal credit—the changes to the process of applying for benefits and being assessed for them. We should all welcome to some extent the rationalisation of a series of disparate benefits that have grown up over the decade. The administrative components of universal credit will include the tax credit system, housing benefit, income support, income-based jobseeker’s allowance, employment and support allowance and so on.

Tonight, we are not debating the principle of universal credit, but considering the roll-out of the administration for the new arrangement and, of course, the massive consequences for our constituents. If it goes well—hopefully, it will—they may not notice anything untoward, but there are massive risks if the administrative transition is not handled competently and carefully. That is essentially the purpose of my set of questions for the Under-Secretary in the short time available today. I sent a list of the issues that I broadly wanted to raise to her private office earlier today because some of the questions are technical. I hope that we can get a little more on the record because there has not been that much opportunity to debate those issues so far, and we are talking about a change that will affect a million people in the first six months of the roll-out of universal credit from October 2013.

One of the most interesting facets of universal credit is the Government’s decision that it should be digital by default: in other words, they are working on the assumption that the vast majority of claimants will access their claims online. I think that the Government’s assessment is that 80% of those claims will be made online. My first question therefore is whether the Under-Secretary can reaffirm that that figure still represents the Government’s assumption. Could she perhaps also give us a logical explanation of how that beautifully neat and round figure of 80% was reached?

Many people who apply for universal credit are not exactly frequent internet users: 15% of council tenants have no access to the internet; one in six adults generally have never used it—that figure is as high as one in four in Northern Ireland, and one in five in the north-east and in Wales—and 4 million disabled people have never used it. Consumer Focus research shows that 69% of people want the ability to have face-to-face transactions for benefit claims at post offices and so on. I therefore want to get a sense from the Under-Secretary of her contingency plan if the 80% target is missed. How will we move towards such a major shift in the way in which people apply for their benefits? We are considering the livelihoods of many people.

Universal credit will be a household, not an individual benefit. It will be assessed on a whole household, so a vast amount of supporting documentation will have to be processed when individuals change their entitlements. Again, how can that supporting documentation be assessed online? How will it be assessed centrally, given that we will move away from the localisation of many applications? That online assumption must be tested significantly.

As a corollary, the next issue is the extent to which the Government commit resources for the minority, who they accept will struggle with applying online. What resources will be available for face-to-face advice and support for claimants who cannot go down the digital route? I understand that the Department is planning some sort of 0845 hotline numbers, but they are expensive, especially for people with mobile phones. However, I am particularly interested in knowing how much money has been put aside for the face-to-face service.

A recent survey of the many district councils in England and Wales suggests that they believe that 50% of people coming through their doors and applying, for example, for housing benefit, need to do that face to face. Obviously, that is at odds with the Government assessment of presumably only 20% needing some sort of support other than the online arrangement. Investing so much in the online arrangement is clearly a dangerous ambition. I understand the logic of wanting greater take-up of digital applications, but I am anxious that the target is so high, and I want to get a sense of the scenario planning and the arrangements that the Government have considered if it is simply not deliverable.

We should cast our minds back to the difficulties with online tax credit arrangements. There was significant fraud, which had to be addressed and meant the arrangements had to be changed. Will the Minister say on the record that she is happy with the anti-fraud measures and the robustness and security of the new online universal credit system? Clearly, it would be a tragedy if so many people were directed to an online system that had to be scaled back at the last minute because individuals found a way of fraudulently fleecing it because it was not secure or robust.

Will the Minister give an assurance—her noble Friend Lord Freud was unable to do so during the passage of the Welfare Reform Act 2012—that the Government’s intention to move to a monthly payment arrangement will have a degree of flexibility? In theory, it is desirable for everybody to plan their budgets and household expenditure on a monthly basis, to mimic in-work salary arrangements, but the trouble is that it is not the experience to date of many people. Many of my constituents in Nottingham, who have suffered a great deal of deprivation or who are not on significant amounts of money take the parcels of money that come in housing benefit or other benefits and hypothecate them for rent, bills or other things. We are asking a great deal of people, sometimes later on in their lives, to change their habits and take payments at the beginning of the month and ensure that they budget so that their rent is fully paid for the rest of the period and beyond.

The danger that people will accumulate increasing arrears to pay for the roof over their head worries me significantly, never mind local authorities, which already say that they have concerns about the collection of rent payments. Currently, housing benefit can be paid directly to the landlord, the local authority or the housing association, but that is ending, so there is a great deal of anxiety about the continuity of housing entitlement.

As I have said, 15% of council tenants do not have access to the internet. In fact, 15% have no access to a bank account and a further 15% have only a basic post office account with limited functionality. Therefore, nearly a third of social tenants might not have mainstream banking capabilities available to them, yet we expect them to move in fairly short order to that monthly budgeting arrangement. Hundreds of thousands of people up and down the country, particularly those who do not have bank accounts, are massively mistrustful of the banking system—they are fearful of the overdraft charges that can hit them if they are unable to plan or manage their cash flow over that monthly period.

It is with those points in mind that I ask the Minister this: is there any flexibility in the roll-out of universal credit to allow weekly or fortnightly payments for those who absolutely need them, or is she absolutely firmly sticking to monthly payments for everybody? That is a crucial question and I would be grateful if the Minister addressed it.

It would also help if the Minister could give us a better sense of the dates for transition to the central system as we move away from local authority administration. There are currently 380 localised IT systems in local authorities up and down the country, largely to deal with housing benefit. They will be phased out as we move towards a central system, with one IT system at the Department for Work and Pensions and one at Her Majesty’s Revenue and Customs. What resources have been available for the transition for councils that have a residual responsibility for some activities over the period—it will be 2017 before full roll-out?

We are starting the process of passing over responsibility to the DWP in October 2013, but some councils will process housing benefit until April 2014, and full migration will not happen until 2017. How will councils be able to do this? It will remain a significant burden for local government, and local council tax payers need to know whether Ministers will meet those costs. It is not necessarily as big an issue in my area as Nottingham city council is a unitary metropolitan authority that has several different functions, but for some district councils housing benefit is 25% of their turnover, so it is a somewhat mission-critical activity. They need to know to what extent they will still be in the business of such administration. What really is the commitment of the Government to a local roll-out of universal credit? Will it still be a local service or will they shift in short order to that central arrangement?

As I read through the documentation, several secondary issues arose. What about pensioners? Many are still reliant on housing benefit, but universal credit is an in-work benefit, so who will be responsible for the administration of housing benefit to pensioners? That is a specific question and I would be grateful for the Minister’s clarification. Obviously, if local authorities are no longer involved in the administration of housing benefit, how will pensioners continue to receive it?

There will be two vast centralised computer systems, and the Chair of the Public Accounts Committee and the National Audit Office are already voicing anxieties about these arrangements. The DWP is moving to the “Agile” methodology, and Computer Weekly had a report recently in which it said that a leaked report from the Cabinet Office major projects authority suggested that the

“Agile methodology remains unproven at this scale”.

An amber risk rating was attached. Is that the case? What is the Government’s assessment of the risks of the change to this system by the DWP? The HMRC computer system will take a real-time approach to the PAYE process, but again reports suggest that the time scale has slipped beyond the April 2013 target. Can the Minister say whether that is true?

If we are to contract out much of this activity, will it be sent offshore? Will the work under these new arrangements be done in the UK, or will much of the IT or contact centre work be done in India or other countries? That would be another helpful clarification.

Another important issue has to be the many thousands of staff who currently work on housing benefit in local authorities up and down the country. Unison and other representatives of the work force have also asked about this. I gather that the Government have decided that TUPE will not apply to those who work in housing benefit administration in local authorities. So there will be a massive redundancy programme in local authorities and no take-up of those staff in the new, centralised arrangements. If that is the case, how will the Government respond to the massive redundancy costs involved? Will the Government compensate local authorities for those costs? Can the Minister say how much that will cost and how many staff will be affected? A lump of money was set aside at the beginning of the spending review period for the transition to universal credit. Have the assumptions behind that sum stayed the same or have they changed?

As the Minister will know, the Opposition have spotted that she and many of her colleagues are under the shadow of the omnishambles and that the Government’s record on competence has already been questioned. When it comes to universal credit, their reputation for competence is definitely on the line, and it has to be proven that they can fulfil their promises. This is a major risk not only to the Government’s reputation but to all our constituents, especially the most needy.

--- Later in debate ---

[Chris Leslie]

I am sorry to intervene, as I know we are getting short of time. The analysis of the support needs of an individual, either face to face at the first point of application or subsequently in recognition of exceptions such as weekly payments or direct payments for landlords, is a key point. How will it be done? Will it be a local service? Is it assumed that predominantly local authorities will pick up those responsibilities? I want to gain a sense of who will be dealing with these things, as the Department for Work and Pensions in Whitehall will not be doing the face-to-face work.

[Maria Miller]

I think the hon. Gentleman is right, and in the pilots we shall pick up some of those issues, particularly the sorts of support that local authorities could provide. Jobcentre Plus will also be involved from the launch of universal credit as an on-site, readily available resource. The hon. Gentleman is right that we have to make sure that the appropriate support is there for the people who might need it, and we want to ensure that such systems are available so that universal credit becomes the success we know it will be.

The hon. Gentleman spoke of the importance of understanding the phased migration fully. We recognise that the move from one welfare system to another needs to be managed carefully, so that no one is left without the support that they need. The transition from the old benefit system to universal credit will therefore take place in three phases over four years, ending in 2017 when between 12 million and 13 million benefit and tax credit claims will become 8 million universal credit claims.

In the first phase, beginning in October 2013, all new claims to the current benefits and credits will be phased out by April 2014, with new claims to housing benefits and tax credits being the last to end in that month. Natural migrations to universal credit as a result of a significant change of circumstances will also be taken from October 2013.

In the second phase, which will begin in April 2014, existing claimants whose circumstances have not changed will start to be transferred to universal credit through managed change. It is expected that, as most of the households whose members are actively seeking work will have been moved through the new claims or natural changes route by April 2014, the households involved in that phase will generally be those with people in part-time work and those that are economically inactive. Priority will be given to households the nature of whose work makes them most likely to benefit from universal credit.

In the third and final phase, from the end of 2015 until the end of 2017, the remaining households will be moved into the new system. Local circumstances, such as staffing turnover, contractual obligations and demography, will be taken into account. The households will be moved on to universal credit in good time before housing benefit loads become too small to be viable. Within those parameters, the focus on work and poverty will be retained. That should allow local authorities to plan with more certainty over the medium term.

The hon. Gentleman rightly sought clarification of the important issue of housing benefit for pensioners. Following the abolition of housing benefit, help with rent and child costs will be provided through pension credit, and will broadly follow the existing rules.

The hon. Gentleman mentioned a number of information technology issues. I am not sure that I can cover all of them today, but I can assure him categorically that there will be no offshore outsourcing of the administration of universal credit, that the Department will send no existing British jobs overseas, and that no personal data are held or can be accessed outside the United Kingdom. Many sub-contractors started using overseas staff under the last Government. We are considering how jobs that used to be sent offshore could be moved back to the UK in the future. I hope that the hon. Gentleman would welcome such a move.

I do not think that the hon. Gentleman raised the issue of real-time information, but I shall bring him up to date in case he is interested. Real-time information is being introduced in HMRC to improve the operation of the pay-as-you-earn system, which will make it easier for employers and HMRC to share information. Under universal credit, entitlement for people who pay tax on their earnings through PAYE will correspond directly with earnings information received through HMRC’s automatic real-time information PAYE data transfer.

HMRC began pilot-testing RTI in April, and has already introduced 10 employer schemes representing a range of sizes with the aim of ironing out any wrinkles. I understand that the initial pilot stage has gone well, and that a further 310 employers joined the pilot yesterday. We are working closely with HMRC to ensure that systems are in place for the introduction of universal credit.

The hon. Gentleman rightly mentioned the important role of local authorities. They have been, and will continue to be, integral to the development of universal credit. We have undertaken extensive work with authorities to ensure that they help us to develop universal credit, and to tap into their expertise. I would like to take this opportunity to thank the local authorities associations of England, Scotland and Wales for their constructive engagement with us, especially those authorities that have already committed time and resources to helping to make universal credit a success.

On 21 March the permanent secretaries of my Department and the Department for Communities and Local Government wrote to chief executives informing them that local authorities will be expected to provide face-to-face support for certain universal credit claimants who will need more intensive help to access the new benefit.

The hon. Gentleman raised the important issue of staff. Local authorities will want to ensure that they deal with that issue correctly. When universal credit comes into force in October 2013, local authorities will have an important role to play, and that role will begin to change, too, so they will go through a period of transition. They will need to make sure they continue to work with us through this process. The Local Government Association and the DWP recently issued a joint prospectus calling on local authorities to work on the pilots I have mentioned. We recognise that costs will be associated with that process and the wind-down of housing benefit, and we will discuss that with DCLG and the local authorities in due course.

[Chris Leslie]

The Minister says that there will be a negotiation and that she will discuss this matter with local authorities, but she has to accept that central Government have decided to introduce the universal credit, and that a number of housing benefit and local authority staff will be made redundant. In a sense, the Government are forcing local authorities to make their staff redundant. The Minister has to accept that they must be compensated by central Government for that.

[Maria Miller]

The hon. Gentleman has made a number of assumptions. As I have outlined, the introduction of universal credit will take place over a number of years. Local authorities already know it is coming, so it would be prudent of them to be planning for the changes and to make sure that they cause as little disruption as possible to their staff. Local authorities will have an important role to play in the future, whether in respect of their staff or of minimising any costs associated with the change. I urge the hon. Gentleman not to make assumptions as to how local authorities will deal with this process. I think most of them will want to plan the transfer sensibly and avoid any unnecessary costs.

I hope I have covered the majority of the points the hon. Gentleman raised. This debate has provided us with a tremendous opportunity to discuss an important part of the Government’s reform agenda, which is based on making sure that work pays, and that we have a strong and robust benefit system that supports families in the right way in order to make sure they can lift themselves out of poverty and that people, both disabled and non-disabled, have the opportunity to go to work. These reforms are a central plank of Government policy.

Question put and agreed to.