Universal Credit

Lord Freud Excerpts

Wednesday 10th December 2014 Lords Chamber

[Lord Clinton-Davis]

To ask Her Majesty’s Government what is their response to the recent analysis by the Office for Budget Responsibility on the rollout of universal credit.

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

In the OBR’s independent forecast of public spending, it has assumed a modest adjustment to the rollout for universal credit, which it says has a comparatively small impact on forecast expenditure. We maintain our determination to deliver the plan already set out which has been assured by the Major Projects Authority and signed off by the Treasury. The plan is on track. Universal credit will bring economic benefits of £7 billion every year.

[Lord Clinton-Davis (Lab)]

Both eminent bodies, the OBR and the IFS, forecast that the policy of the Government is reducing the state to its lowest level since the early 1930s. That is utterly different from what the Minister is predicting. Is not that dire consequence possible? It is utter madness, is it not? Does the Minister dispute the conclusions of both bodies? What is his prognosis?

[Lord Freud]

Well, my Lords, I will talk about universal credit and what it aims to do for the people who need support from the state system. It directs our funding far more efficiently to people who need that support. It produces economic benefits of £7 billion every year and it does so at an investment cost of £1.8 billion. That investment cost is down from the £2.4 billion that we originally envisaged.

[Baroness Eaton (Con)]

What is my noble friend doing to ensure that the most vulnerable are supported through universal credit?

[Lord Freud]

One of the things that we need to do with universal credit is to make sure that everyone can take part in it. We are creating a system to do that through universal support, where we go into partnership with local authorities to help people, concentrating particularly on financial and digital inclusion. We then pull in all the other third sector companies, such as landlords, Citizens Advice and credit unions, to make sure that support is holistic.

[Baroness Sherlock (Lab)]

I do not doubt the Government’s intentions or the Minister’s commitment, but this has to be delivered to work. To go back to the original Question, the OBR said at the time of the Autumn Statement that, despite having already been delayed repeatedly and reset last year, it was assuming an extra six-month delay on top of the Government’s current plans because of what it called “optimism bias” in the DWP. Just right now, as the Public Accounts Committee is hearing from the Treasury, it was confirmed by the chair that the Treasury has not signed off the DWP’s business case for universal credit. What can the Minister say to the House? Universal credit is running almost four years late. It is costing money to taxpayers and vulnerable clients. It risks, frankly, making a laughing stock of the department. What can the Minister tell us to reassure us and how can we believe him?

[Lord Freud]

I re-emphasise that the Treasury has signed off the strategic outline business case. This plan is being done in a way that makes sure that we do it safely and securely—not the big bang method. As I said, it is being done more cheaply than originally envisaged. It is vital that we do not do the kind of thing that happened with tax credit when it was opened on one day and was a total shambles for millions of people.

[Lord Forsyth of Drumlean (Con)]

Will my noble friend resist the carping criticism coming from the opposition Benches and take credit for the fact that when they were in government for 10 years they did nothing about the fact that some people were worse off in work than out of work? My noble friend and his colleagues are to be congratulated on taking very difficult and complex decisions to solve this problem and seeing more people coming into work as a result.

[Lord Freud]

My Lords, I have developed an extraordinarily keen appreciation of why politicians do not like to do fundamental reform, but this reform is absolutely essential because the present system is a shambles. It does not encourage people into work or reward them systematically for doing that. The whole point of universal credit is that you join up the out-of-work and the in-work systems so that there is a smooth progression that everyone can understand.

[Lord McFall of Alcluith (Lab)]

My Lords, £40 million has been written off with IT in this system with a further £40 million being used on the old IT system. The useful IT life has now been downgraded from 15 years to five years. Given that this information was extracted painfully from the department by the NAO, is it not the case that warning lights have been flashing for two years and that only an objective assessment of the scheme will do in order to determine whether this architecture is fit for purpose?

[Lord Freud]

My Lords, the NAO has recognised the savings to government of going the way that we are going, with a live service showing us how it works and a properly designed digital service coming out behind. The NAO has recognised that the savings to government of that approach are £2 billion.

[Lord Harris of Haringey (Lab)]

My Lords, the Public Accounts Committee has pointed out that the Government are too trusting of quasi-monopolistic private providers such as G4S, which is to have a major role in the development of universal credit. Have the Government forgiven it for overcharging the taxpayer £130 million for tagging people who did not exist or had died?

[Lord Freud]

G4S has no role in the run-out of universal credit.

[Baroness Farrington of Ribbleton (Lab)]

My Lords, the Minister was given a very gentle question from his noble friend. Will he tell the House how much taxpayers’ money in this country is being paid to people to subsidise employers who do not pay a living wage, particularly those employers who fail to pay taxes properly here? I appreciate that this is a wide question. I would like a detailed written answer about how much each one of us is subsidising people who are tax shy.

[Lord Freud]

I will give an oral answer, not a written one. The whole system was invented by the previous Government under tax credits where £170 billion was spent.