Welfare Reform Bill

Lord Bilimoria Excerpts

Tuesday 13th September 2011 Lords Chamber

[Lord Bilimoria]

My Lords, from 1999 to 2001, I served on the New Deal Task Force of the then Department for Education and Employment, and thereafter from 2001 to 2007 I served on the National Employment Panel in the newly formed Department for Work and Pensions. When I look at Britain, I see a country that is so wealthy that we have been able to spend 50 per cent of our GDP on public spending—spending approaching £700 billion a year which enables every citizen of this country to access a welfare system and public provision that provides free school education, free health at the point of delivery, and access to all the areas covered in this Bill, including unemployment benefit, housing benefit and childcare benefit. Our welfare and pensions bill alone, as the Minister has said, is £200 billion a year, which is by far the largest element of our public expenditure.

Given our economic situation, the Government are of course trying to bring public expenditure down, but I believe that they are making cuts where they should not be. It is not appropriate, for example, to make cuts in our defence expenditure or to harm our competitive advantage in areas such as higher education. But in the area of welfare the Government are doing absolutely the right thing in attempting to reduce the giant burden of these costs, which have been escalating over the years. It is an area where, in many ways when standing back from it, a detached observer could quite reasonably ask, “Why, during the boom years until 2007, was welfare spending increasing? Why, with the advances in medicine and health, were more and more people claiming disability living allowance? Why, when reports from the Office for National Statistics show an increase in the number of workers in the UK who were born abroad from 1.9 million to 3.5 million since 1997, were there just 25,000 more British-born workers in employment in 2009 than there were in 1997?”.

During my several years working in welfare reform, it became very apparent to me that the system we had created in this country was too complicated and had resulted in a culture of welfare dependency and a culture of welfare entitlement, as the noble Lord, Lord Feldman, said in his excellent maiden speech. It was a system where, more often than not, it did not pay to work, as all the benefits combined often yielded more of an income than working. Also, the risk of taking a job and losing those benefits—in particular, housing benefit—along with the enormous bureaucracy involved in getting all the benefits back in this complicated welfare system, was a huge deterrent to working. The Government’s universal credit will try to address this, but is it going to be able to deal with the benefits trap? The Government’s plans have already been criticised for the way in which they are trying to phase in centralised control of housing benefit. At the moment these are dealt with by local authorities, but in future they will go through the universal credit. Are the Government going to be able to administer this in a fair and practical way?

Another shocking observation during my years of working in welfare reform was that our labour force in the UK showed a huge reluctance to move in order to get a job, or even travel to a job—sometimes as close as going from one borough to another in London. Do the Government believe that their proposals are going to help improve the mobility of labour? After all, we have millions of European Union workers in this country who have travelled thousands of miles to get a job.

Along with simplification, one of the objectives of these reforms is to reduce fraud and administrative costs. But to me this seems like Groundhog Day. I remember that 10 years ago we had the formation of the Department for Work and Pensions with exactly the same objectives: delinking education and employment by putting social security together with employment. Those objectives were noble and logical. As people came in to collect their welfare support, you would be able to work with and try and get those individuals back into work, and you would be able to clamp down on fraud and abuse of the system. But what is the reality 10 years later? We still have an estimated £5.2 billion in fraud and error overpayments in the benefits and tax credits system—after the billions spent on reorganising, splitting up and putting back together giant departments employing some 125,000 people. The DWP needs a huge budget of £2 billion a year just to run all this.

Where are our priorities when we are cutting the higher education teaching budget by a few billion pounds, resulting in student fees being tripled and cutting one of this country’s key competitive areas—one in which, along with the United States, we are the best in the world? In our biggest spending department, these figures would be lost in the roundings. The Government’s implementation of universal credits and all these reforms is going to require huge new IT systems. Given the track record in implementing giant IT projects—let us look no further than at the NHS—and to reinforce what was said by the noble Lord, Lord German, do the Government really believe that they can deliver all they are promising for the £2 billion that they have budgeted?

I also remember that some of the best and most effective delivery of welfare to work initiatives was by private sector firms. However, it is unclear what the Government’s plans are in regard to using the private sector to deliver their reforms. What are they?

Throughout my experience working with the Government in welfare to work, we used to refer to the “Australian Example”. I had the opportunity to meet Prime Minister John Howard, who personally explained to me how his Government made what they thought would be an unpopular decision by clamping down on the abuse of their welfare system and bringing in tough measures of getting people who could work into work, including compulsory voluntary work while they were on benefits looking for work. They found that the working, tax-paying population were really happy and supportive of the Government’s toughness—the scheme ended up being popular. Therefore, it is no surprise that a recent ONS survey showed that 53 per cent of people in this country believe that the current welfare system is too generous. That has gone up from 38 per cent a decade earlier. This should give our Government the confidence to pursue their proposals. From my experience in welfare to work, there is no question but that a working society provides, in every way, a healthier and better life; that work is not only necessary to provide and contribute to society but is good for people as such.

One of the recent Indian high commissioners here remarked to me that, in his experience of having been a diplomat around the world, he felt there was a lack of hunger and drive in this country. Although we are the most amazing and resilient country in the face of terrible adversity and tragedy—which is something that has been proved for centuries—if we look in the mirror, we will see that our welfare system now has one out of four working-age adults not working. As things stand, work often does not pay. On the other hand, we must make sure that those who genuinely cannot work—those who are disabled—are looked after, and the Government must reassure us that their plans will not jeopardise this. We have heard that a lot in this debate, and will continue to, because recently there has been justifiable criticism regarding the DLA and compensation for carers. In addition, what are the Government doing in these reforms to address the needs of veterans, both old and young?

Do the Government really have confidence that what they are proposing will not only drastically reduce this multi-billion-pound area of spending, but produce a system that provides support for those who cannot work and makes sure it does all it can—in a fair and firm manner—to ensure that those who can work do work; and that work pays?