Universal Credit

Lord Freud Excerpts

Tuesday 10th December 2013 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend the Secretary of State for Work and Pensions to an Urgent Question in another place on universal credit. The Statement is as follows:

“Universal credit is a major and challenging reform which will transform the welfare state in Britain for the better, ultimately accounting for £70 billion of benefit spending each year, with 3 million people better off. Rightly, for a programme of this scale, the Government’s priority has been, and continues to be, its safe and secure delivery. This has been demonstrated throughout our approach to date, which started with the successful launch of the pathfinder in April 2013 and has continued with the controlled expansion of universal credit, starting as planned in October 2013 and running through to spring 2014.

What is more, we are already pushing ahead with the cultural and business change required as part of universal credit, retraining 25,000 Jobcentre Plus advisers, implementing digital jobcentres and rolling out the new claimant commitment, which is now on track to be in place in half of all jobcentres by the end of this year and across the country by the spring.

Yesterday, I announced and discussed at length with the Work and Pensions Select Committee our plans for the next stage of implementing universal credit, following my department’s work over recent months with the Government Digital Service to assess delivery options. That work has explored the use of the latest digital technologies, and assessed the utility of the work we have done to date, through the universal credit pathfinder, going forward. The conclusions of this work were set out yesterday.

First, as part of the wider transformation in developing digital services, the department will further develop the work started by GDS to test and implement an enhanced digital service. This will be capable of delivering the full scope of universal credit and will make provision for all claimant types. Meanwhile, we will expand our current service and develop functionality so that, from next summer, we progressively start to take claims for universal credit from couples and, in the autumn, from families.

Once the service is safely tested in the 10 live universal credit areas, we will expand the rollout to cover the north-west of England. This will enable us to learn from the live running of universal credit at scale and for more claimant types, including the more vulnerable and complex, while extending to more people the positive benefits of universal credit.

Ninety per cent of people in the pathfinder are claiming universal credit online and 78% are confident about their ability to budget with monthly payments. It pays to work, with 65% of claimants reporting that UC offers better work incentives than JSA, and it is less complex, upheld by the 65% who agreed that it was easier to understand their obligations.

As we progress with the future delivery of this flagship programme, we will continue the same careful approach—test, learn and implement—rolling out through the regions. On this basis, our current planning assumption is that the universal credit service will be fully available in each part of Great Britain during 2016, with our having closed down new claims to the legacy benefits that it replaced and the vast majority of the remaining legacy caseload moving to universal credit during 2016 and 2017. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution”.

--- Later in debate ---

[Lord Freud]

My Lords, as I said in the Statement, we are planning to have all new claims for the six legacy benefits that UC replaces moved on in 2016. By 2017, we will take the remainder. An exception in the group is those currently on ESA, and the OBR estimates that 600,000 to 700,000 of them will be left on it. We think that it is much safer to deal with that group very carefully later; it is the most vulnerable group. I know that noble Lords in this Chamber have been extraordinarily concerned about this group and some of this reflects that concern.

On development, I remind noble Lords that we have reset this programme. We moved in early. The National Audit Office made the point that there were very high levels of ministerial and senior departmental engagement here, which led to the reset that we announced. As I said, we have written off £40 million, which is much below the estimates of hundreds of millions of pounds that have been put around.

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend resist the bullying from the opposition Benches to move this programme at a speed that would result in difficulties? Will he gently remind them that the system he inherited was one where the poorest people in the land effectively paid marginal rates of tax of more than 95%? The Secretary of State is to be congratulated on taking this very complex system and making it worth while for people to be in work as opposed to being out of work and on benefits, and doing it with sensitivity that takes account of the needs of all groups. He should ignore the opposition, who considerably failed in government to tackle this appalling problem.

[Lord Freud]

My Lords, if you do these major cultural transformations, it is absolutely vital that you do them at the pace at which you can. One thing we are doing, which is a development from our thinking in 2010, is a huge programme of testing, learning and implementing. In particular, one thing we have introduced in the past two years—thanks, I must acknowledge, to help from this Chamber—is very substantial work with local authorities on the local support service framework. I think that will support the vulnerable in a way that they have never been supported in this country in the past.

[Lord Touhig (Lab)]

My Lords, on 6 November last year, in answer to a Question I put to him on the IT system for universal credit, the Minister confidently told the House that,

“the universal credit programme remains on schedule … to go live in October 2013”.—[Official Report, 6/11/12; col. 888.]

Having already admitted that the Government have written off £40 million in IT costs, what does he say now and how confident is he that it will go live in 2016?

[Lord Freud]

My Lords, I need to remind the noble Lord that the system went live, as he put it, earlier than October—it went live last April. We have a pathfinder which is learning extraordinary amounts. In particular, I remind noble Lords that we have established that the link between universal credit and the real-time information system works. The real-time information system that we were able to announce earlier is now fully up and running, with 99% of people on PAYE feeding through into it.

[Lord Martin of Springburn (CB)]

I do not rise to criticise universal credit but to put on record the great worry in the community-based housing associations that levels of arrears will rise. That is a worry for them. Could the Minister look into that?

[Lord Freud]

I thank the noble Lord for that. We have spent a lot of time bottoming out this issue. Clearly, incorporating housing benefit into universal credit is an absolutely central part of what we are trying to do, but it was essential that we did not get to a position that undermined the finances of the social housing industry. That is why we ran the demonstration housing projects. From those, we have created a system which means that we will have switchbacks after two months and an early alert after one month. There is a very effective underpinning for the finances of housing associations.

[Lord German (LD)]

My Lords, I share the disappointment that this programme has slipped. Quite frankly, I am sure all noble Lords would have liked it to be on time. However, there has been an appalling record in the introduction of very large-scale IT systems. In the past—I point to the record of the previous Government—they have hurt many people and cost many, many more millions of pounds than this. Surely my noble friend can identify now that this is something with which we need to take the greatest care. We must ensure that we move forward in a step-by-step way, being safe, not harming anybody and not putting anybody at risk. We must share the disappointment of it not being as quick as we wanted but in the end it must be the right service for the right people at the right time doing the right job.

[Lord Freud]

My Lords, as the Secretary of State mentioned in the other House, one thing that influenced us a lot was what happened with tax credits, which was why we took the decision to move in early and do this reset. Tax credits were announced in 2001 and rolled out from 2003. In the first three years of operations, £6 billion was overpaid and 400,000 claimants received their payments late, a third of cases monitored by Citizens Advice had their payments reduced below the poverty line, and IT systems were deemed unstable and not fit for purpose by the PAC. We have not done that. We have moved in early and made sure that we go safely and securely, and that when we introduce a system it is one that will not let people down.

[Baroness Hollis of Heigham (Lab)]

My Lords, I hope very much that the Minister is right; we will be cheering him on if he is. Most of us, I am sure, support universal credit but the House has made its views clear on utility bills when they are entirely online and people cannot have a paper back-up. The more we learn about the potential instability of the IT system that will handle universal credit, the more I would urge the Minister to ensure that there is a paper system as back-up for those whose entire income may come, or not, depending on the stability of the IT system. If the Minister is wrong on this, they will go hungry. Can he ensure that we have a paper trail, at least while the system is bedding down?

[Lord Freud]

My Lords, we already have an electronic payments system, so nothing is different or will change in the actual payments system. I think that the noble Baroness was asking: is there a proper back-up to the IT information systems? Clearly, in any IT system—and in today’s legacy systems, which are kept on computers, albeit somewhat older ones—we need to record that information and make sure that we have back-ups in case of loss. We will maintain that principle.

[Baroness Lister of Burtersett (Lab)]

My Lords, Howard Shipley told the Work and Pensions Committee that the next stage is couples. That will be a complicated issue as couples come together and divide, and may have children. Things happen. This sort of software is not something that you get on the back of a cigarette packet. Surely it was understood before we got this far that couples come together and separate. Does the Minister accept that the evidence from single people about budgeting monthly tells us nothing about what it will be like for mothers trying to budget on behalf of families monthly?

--- Later in debate ---

[Lord Freud]

Clearly, these groups behave differently and one thing that we are determined to understand is how each of those different groups will behave. It is a question not just of our operational management of the systems but of what the behavioural responses are. That is what “test and learn” is about. We have a system and we have built a long way into the couples. It is quite tough to do it—it is tougher and there are a lot more issues than with singles—but that system is rolling out from next summer and we will be looking very closely at the behavioural responses.